Reuters — Marathon Petroleum and ADM announced on Thursday a joint venture to produce soybean oil that will be exclusively sold to Marathon for its renewable diesel plant.
Refiners are on the hunt for secure access to feedstocks for renewable fuels amid supply constraints and soaring prices for fats, greases and oils.
A joint-venture soybean processing complex at Spiritwood, N.D., about 300 km south of Winkler, Man., is expected to produce about 600 million pounds of refined soybean oil annually, enough feedstock for about 75 million gallons of renewable diesel per year, when complete in 2023, the companies said.
That’s about 40 per cent of the feedstock needed to supply Marathon’s Dickinson, N.D., plant, which is designed to process about 180 million gallons of renewable diesel annually. Dickinson is about 340 km west of Spiritwood.
The soy crush plant, which ADM first announced in May, will now be majority-owned by ADM with a 75 per cent stake, while Marathon Petroleum will own the rest.
A growing number of refiners and renewable fuel producers, including Marathon, plan to ramp up green fuel production in the coming years, putting pressure on supply and feedstock prices.
ADM executive Ken Campbell said he believes renewable diesel demand may be as much as five billion gallons by 2025.
But Marathon called the soybean oil’s economics “challenged” because higher prices coupled with the relatively higher carbon intensity of the oil limits refiners’ ability to profit on production.
Margins to produce renewable diesel from soybean oil so far this quarter have averaged about US$1.35 per gallon, more than $1 lower than processing used cooking oil, according to data from Tudor, Pickering and Holt.
Carl Icahn’s CVR Energy put off plans to produce renewable fuels at its Wynnewood, Oklahoma, facility.
U.S. grain handler The Andersons also plans to supply more renewable diesel feedstock to Marathon, with which it has an existing joint venture in four ethanol plants.
— Reporting for Reuters by Arunima Kumar in Bangalore and Laura Sanicola in New York; additional reporting by Karl Plume.