Finland-headed oil refiner and renewable products producer Neste Oyj has announced that it has signed definitive agreements for the establishment of a 50/50 joint venture with US-based Marathon Petroleum Corporation (MPC). The joint venture will produce renewable diesel following a conversion project of Marathon's refinery in Martinez, California (CA) aka the Martinez Renewable Fuels project.
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Through this joint venture, Neste will obtain a 50 percent interest in the Martinez Renewable Fuels project. The closing of the joint venture is subject to customary closing conditions and regulatory approvals, including obtaining the necessary permits, which depend upon certification of a final Environmental Impact Report.
Neste’s total investment will amount to approximately EUR 0.9 billion (USD 1.0 billion), inclusive of half of the total project development costs projected through the completion of the project. Estimated total project costs for Martinez remain at approximately US$1.2 billion.
This is a very important step in our renewables growth strategy execution. The location of the facility is in the middle of the growing renewable fuel market in California. The partnership will further strengthen our footprint in the United States, as we will have a broad value chain that covers feedstock sourcing to renewables production and sales in the US. We are thrilled to partner with Marathon: we both share an ambition in offering more high-quality, lower-emission renewable products, thus helping customers to achieve their sustainability goals, said Peter Vanacker, Neste’s President, and CEO.
Nameplate production by end of 2023
The Martinez facility is currently targeted to have a production capacity of 260 million (US) gallons (≈ 984 million litres) per year of renewable diesel in the second half of 2022, with pretreatment capabilities to come online in 2023.
The facility is planned to reach its full annual nameplate capacity of 2.1 million tonnes (730 million US gallons) by the end of 2023.
The production output will be split evenly between the joint venture partners, and each partner will be responsible to market the products under its own brand and responsibility.
The project is expected to increase Neste’s renewable products capacity by slightly over 1 million tonnes (365 million US gallons) per annum.
Support California’s climate goals
According to MPC, this strategic partnership is expected to advance its current project objectives of delivering low carbon intensity fuels to support California’s climate goals. MPC and Neste will leverage their complementary core competencies in the joint venture.
MPC brings experience in renewable diesel facility conversion, large capital project execution, and operating expertise in the California market. The facility will be operated by Marathon, which has long experience as a leading refinery operator and in executing major CAPEX projects in the United States.
Neste brings knowledge in sustainable feedstock sourcing and in renewable liquid fuels production while the joint venture reflects both partners’ commitment to obtain low carbon intensity feedstocks to achieve the project objectives of providing fuels that meet the demand driven by the Low Carbon Fuel Standard (LCFS).
We’re excited to partner with Neste as this strategic partnership enhances our strong Martinez project by leveraging our complementary strengths and expertise and is consistent with our previously announced strategy to source low carbon intensity feedstocks through long-term arrangements, joint ventures, and alliances. The project will utilize existing processing infrastructure, diverse inbound and outbound logistics, and is optimally located to support California’s LCFS goals while strengthening MPC’s footprint in renewable fuels. Our partnership with Neste signals another step in our commitment to the energy evolution and our focus on lowering the carbon intensity of our operations and the products we manufacture, said Michael J. Hennigan, President, and CEO, MPC.
Joint feedstock sourcing
Both Neste and Marathon will be responsible for feedstock sourcing for the joint venture. Neste’s renewable waste and residue sourcing platform in the US includes fully owned Mahoney Environmental, a leading collector and recycler of used cooking oil (UCO), and Agri Trading, one of the largest independent renewable waste and residue fat and oil traders in the US.
We have committed to helping our customers decrease their greenhouse gas emissions by at least 20 million tonnes of CO2eq annually by 2030. This joint venture will help us in exceeding our commitment as it will bring a substantial amount of renewable diesel to our customers in the US. Our ongoing Singapore expansion project and this joint venture will increase our total production capacity of renewable products to 5.5 million tonnes by the end of 2023 and we will be the only global provider of renewable products with a production footprint in North America, Asia, and Europe. As announced in Neste’s Financial Statement Release 2021, the project for a possible next world-scale renewables refinery in Rotterdam is in the engineering phase and we are approaching readiness for a final investment decision during the next months, ended Peter Vanacker.