The investment will result in a 50/50 joint venture, under the memorandum of understanding the two companies said they reached.
U.S. refiners have been ramping up their production of renewable fuels, spurred by federal and state financial incentives, and are seeking to secure guaranteed access to vegetable oils, animal fat and used cooking oil, which some refiners say is already difficult to source.
Chevron would have the right of first refusal for the soybean oil crushed by Bunge, the companies said.
Refiners are eyeing partnerships with agricultural producers to source and process vegetable oils so they can produce green fuels such as renewable diesel. Oil majors want to use their existing crude refineries and avoid costly retrofits and conversions. read more
Chevron and Bunge’s proposed joint venture will include expanding Bunge’s facilities in Destrehan, Louisiana, and Cairo, Illinois, to nearly double their capacity by 2024. The facilities currently crush 7,000 tons of soybeans per day, which can produce roughly 330,000 to 340,000 gallons of soy-based diesel.
Earlier this month, Marathon Petroleum (MPC.N) announced it would build a soybean processing complex with ADM in Spiritwood, North Dakota, as part of a joint venture in which Marathon will receive exclusive access to the soybean oil.
Unlike other green fuels such as biodiesel, renewable diesel can power auto engines without being blended with diesel derived from crude oil, making it a lower-pollution option.
Soybean oil prices have more than doubled in the past year, hampering some refiners’ plans. Soybean oil is more carbon intense and thus less lucrative than processing used cooking oil and animal tallow, which are in shorter supply. Chevron and Bunge said they will explore low-carbon feedstocks and pretreatment possibilities.
Bunge already supplies soybean oil to Chevron, which co-processes small quantities of renewable diesel at its El Segundo, California, refinery. Chevron said the amount of renewable diesel it will produce will be driven by market conditions.