Vertex Energy delays renewable diesel production to Q2 2023 after ‘review of project-execution risk’
Vertex Energy Inc. provided an update Sept. 12 on the company’s refinery-conversion project to produce renewable diesel in Mobile, Alabama. Vertex Energy is pushing back start-up of renewable diesel manufacturing from end of this year to the second quarter of 2023, calling it a “strategic extension of the planned construction timeline.”
The project, which will cost $90 million to $100 million, involves modifying the existing hydrocracker. Once complete, the refinery is expected to begin production of between 8,000 and 10,000 barrels (336,000 and 420,000 gallons) per day of renewable diesel, or between approximately 114 million gallons and 143 million gallons per year (mgy). The company anticipates production volumes to subsequently increase to approximately 14,000 barrels (588,000 gallons) per day, or roughly 200 mgy.
“After a thorough review of project-execution risk by the company, mechanical completion of the Mobile Refinery’s renewable diesel conversion project has been proactively extended from its initial target of year-end 2022, to the first quarter of 2023,” Vertex Energy stated. “These risk considerations are the result of recent COVID-19 induced product delays and global supply-chain shortages in several previously unimpacted markets, including common pipes, valves and fittings, and certain base bulk materials. Limited visibility into a solution for these challenges, combined with the notable financial benefits associated with reduced downtime and extending current operations, have allowed the company to respond by extending the project timeline to ensure all necessary parts and materials are ready and on site prior to shutting the hydrocracker unit down.”
While mechanical completion is now expected to occur in the first quarter of next year, production is anticipated to begin in the second quarter.
The company stated that management estimates the decision will result in a positive impact to its fourth quarter gross margins this year of between $15 million and $17 million, as a result of maintaining current operations through the end of the year—assuming current refining spreads continue.
“I am pleased with the team’s ability to remain nimble in a highly dynamic market environment,” said Benjamin P. Cowart, Vertex Energy president and CEO. “We are eager to begin the production of renewable diesel, we are confident in this decision to extend the timeline, while seeking to achieve an improvement in safety and reduction in project risk, compounded by the expected incremental financial benefit of maximizing participation in current market economics. We look forward to continuing to execute the project on budget, as well as advancing our commitment to supplying lower-carbon fuel solutions to the market.”