Cresta Eyes Come-By-Chance Conversion

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A private equity firm is looking to convert the idled Come-by-Chance refinery in Newfoundland, Canada, to a renewable diesel and sustainable aviation fuel producer. Texas-based Cresta Fund Management said it acquired a controlling stake in the refinery, according to a report from Reuters. Cresta did not respond to requests for comment by press time Tuesday. The 135,000 barrel per day refinery, currently owned by North Atlantic Refining, has been off line for more than a year; a recent attempted sale to New Brunswick-based Irving Oil fell through. Cresta would be the latest entrant into the growing North American renewable fuels market as an accelerating energy transition renders investment in the sector more attractive. With environmental regulations tightening and Canada and several US states implementing climate goals and low-carbon fuel standards, downstream players are working to meet the new targets. Renewable diesel is seen as an attractive option since the fuel can essentially displace petroleum diesel on a one-to-one basis. Market players describe it as a "drop-in fuel" with much lower emissions than petroleum diesel. Regulatory Support In addition to its flexibility in existing petroleum infrastructure, renewable diesel receives some of the most favorable greenhouse gas reduction scores among existing fuel pathways for programs such as the Renewable Fuel Standard (RFS) and California’s low-carbon fuel standard, analysts at the Energy Information Administration (EIA) said in a recent report. The same holds true for Canada, with its Clean Fuel Standard playing the role of regulatory catalyst. Phillips 66 and Marathon Petroleum both recently announced conversions of California refineries to run renewable diesel, while Valero is also expanding capacity at its Diamond Green Diesel joint venture. In all, prior to Come-by-Chance, EIA experts said they saw almost 300,000 b/d of new renewable diesel supply coming on line by 2024. But that boom implies higher demand for agricultural oils, animal fats and tallows, as well as used cooking oil and other waste oils -- the feedstocks used to produce renewable diesel. “With the upcoming surge in … capacity coupled with the wide deviation in margins by feed, it’s reasonable to expect that some of the benefits of advantaged feeds will get compressed over time,” noted analysts with Tudor Pickering Holt. The EIA’s analysis noted that some market players are seeing pressure already. “To date in 2021, these feedstocks have faced lower supply and higher demand, leading to sharp increases in agricultural commodity prices and prices of renewable identification number (RIN) credits for RFS compliance,” the agency said. Most of the conversions have taken place on the US West Coast. Come-by-Chance is the first potential major conversion of an Atlantic coast refinery to renewable diesel. Downstream Doldrums While conversions have been focused mostly on the West Coast, the US East Coast -- also known as Padd 1 -- has lost a significant chunk of downstream capacity over the past two years. Come-by-Chance was a premier foreign supplier to the area. Its idling impact was largely muffled by the Covid-19 pandemic's destructive effect on demand. The 330,000 b/d Philadelphia Energy Solutions refinery exploded mid-2019, and the site has been bought up by a non-refiner. PBF Energy rationalized some capacity at its Delaware City and Paulsboro plants last year. Data from the EIA show that since the start of 2019, Padd 1 has lost over 400,000 b/d in throughputs. While remaining regional refiners face a less crowded environment, they will not be able to make up for capacity losses and meet demand by increasing utilization. And flows from the US Gulf Coast face a hard ceiling -- the capacity of two pipeline systems. Imports of refined fuels will likely rise as a result. Frans Koster, New York

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