Trading Insights

Petroleum Refining: How ESG projects are driving energy transition

Hillary Stevenson

Senior Director of Energy Market Intelligence at IIR Energy

James Mitchell

Commodity Thought Leader, Refinitiv

In this blog produced in collaboration with IIR Energy, we take a look at the environmental, social and governance (ESG) projects across North America and Europe that are helping to drive broader global energy transition goals.

  1. Refinery ESG initiatives and projects are gaining traction across the globe.
  2. Many refineries are already seeking to maximise the value of regulatory incentives aimed at promoting and supporting ESG projects.
  3. Given the dynamic nature of the industry, all stakeholders need to ensure access to complete, reliable and up-to-date data and analytics.

The growing importance of ESG initiatives

There are core challenges the global petroleum refining industry is currently facing. One of these is the pressing need for industry stakeholders to develop and optimise energy transition projects.

This presents stakeholders with some immediate obstacles to overcome – notably sourcing and securing renewable fuel feedstocks, such as soybean oil, molasses, tallow, used cooking oil (UCO) and more.

The good news is that the transition challenge also presents opportunities, in that a range of regulatory incentives offering substantial support for renewable fuels production, carbon capture and GHG reduction efforts exists.

Many industry stakeholders across the globe are already seeking to maximise the value of these incentives and are investing in ESG projects. More than this, they are acutely aware of the importance of the broader aims of such initiatives, as projected spending data reveals.

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A snapshot of spending data

IIR Energy data reveals a projected total spend of US$16.5 billion across 147 ESG projects in North American and European refineries. This data relates to the 2023 and 2024 kickoffs.

IIR Energy’s Senior Director of Energy Market Intelligence, Hillary Stevenson, explains that by far the largest portion of this spending relates to renewable fuels, and that this is largely driven by regulatory requirements and incentives for renewable fuels production.

The US Environmental Protection Agency’s Renewable Fuel Standard (RFS) requires regulated entities to acquire credits – called renewable identification numbers (RINs). Refiners can reduce their RIN price risk by diversifying to produce renewable diesel.

NA and EU Refinery ESG Projects Kickoff 2023-2024

Chart shows the breakdown of anticipated refinery ESG project spending across North America and Europe.

Source: IIR Energy

The chart above shows the breakdown of anticipated refinery ESG project spending across North America and Europe. It is clear that renewable fuel spending accounts for the lion’s share of the total, with the second biggest spend allocated to carbon capture and storage projects.

Drilling down, the majority of these projects are in Europe (123 vs. 24 in North America), but total spend in North America tops projected European spend.

IIR Energy provides real-time, supply-side global market intelligence for the commodity-trading community.

  Project Count Spend Millions
Europe 123 $6,729
North America 24 $9,698
Grand Total 147 $16,427

It is also important to note that the figure of US$16.5 billion relates solely to refinery projects in these areas. If one widens the net to include broader ESG and sustainability projects across the industry (in the same regions and across the same timeframe) this figure rises to a staggering US$1.07 trillion, according to IIR Energy.

Renewable diesel capacity in North America

Looking specifically at how much renewable capacity is either already operational or planned in North America, an analysis of 40 projects tracked by IIR Energy reveals that:

  • Volumes of 175,000 bpd are already operational.
  • For units in construction, there is a high probability of 114,000 bpd; a medium probability of 54,000 bpd, and a low probability of 293,000 bpd being achieved, for a total of 635,000 bpd should all projects be complete.

North American Renewable Diesel Capacity

An analysis of 40 projects tracked by IIR Energy reveals how much renewable capacity is either already operational or planned in North America.

Source: IIR Energy

Stevenson goes on to comment that the percentage of demand that even the maximum potential volume will meet is low – approximately 1/6 (16%) of US distillate demand – and that this is unlikely to replace petrol or diesel in the next five years.

Some noteworthy renewable diesel conversion projects include:

  • Marathon Petroleum’s Martinez refinery in California
  • Holy Frontier’s Cheyenne refinery in Wyoming
  • Come by Chance Refinery (now known as Braya Renewable Fuels) in Canada
  • Marathon Petroleum’s Dickinson refinery in North Dakota
  • Shell’s Convent refinery in New Orleans, Louisiana

Renewable diesel additions (co-processing) projects worth noting include Chalmette Refining’s US$550m renewable diesel addition and CVR Energy’s Wynnewood refinery initiative.

The right data, at your fingertips

Jim Mitchell, Head of Americas Oil Analysts, Refinitiv comments, “Refinery ESG initiatives are gaining traction across the globe. In the first blog within this series, we outlined some potential grassroots developments that are on the horizon. All of these include an element of ESG-related investment.”

Mitchell goes on to stress the importance of ensuring access to complete, reliable and up-to-date data and analytics, “The highly dynamic nature of this industry, in terms of capacity, projected capacity, ESG developments and more means that it is critically important for industry stakeholders to keep abreast of changes as they happen. You need the right data at your fingertips.”

To empower industry players, Refinitiv and IIR Energy have collaborated to create a trusted combination of detailed operational knowledge and comprehensive, accurate data: IIR’s PetroCast Live, available on the Refinitiv platform.

The solution delivers real-time data that is continually updated to provide insights into global refining operations, including ESG projects, and inform better decisions.

Mitchell concludes, “As ESG initiatives across industries continue to move to global centre stage, ESG refinery projects are firmly in the spotlight – and have become a fundamental part of the drive to achieve global energy transition goals.”

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