After a 2020 filled with challenges and financial loses due to a pandemic that caused supply disruptions and crashed demand, refiners are advancing plans for the transition to renewable fuels, the new hot topic for the industry and the market.
Independent refiners see these new low-carbon fuels as a means to stay on track with the market, as they could be left behind in the transition to electric vehicles.
With financial results from last year in hand, executives are now devoting more and more time to discuss how they will tackle the issue.
Marathon Petroleum is one of those companies to which the pandemic hit hard. For financial year 2020, the company reported losses of $12,2 millions. Mike Henningan, CEO, said quoted by Reuters: “Renewables is the hot topic, and I think we’re in a real good position to put ourselves in a good spot there.”
Although he added the company has not clear yet which fuel will be the post-pandemic. Initially, the company is transitioning its Martinez, California, refinery to renewable fuels. Even if that means spending the whole 2021 $350 millions budget in just that refinery.
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Renewable fuels segment turned profits to Valero in 2020
Still, its Dickinson refinery, in North Dakota, started producing renewable fuels sold in California market since last year.
Right now, California is the hot spot for renewable fuels sales, as the state’s low carbon fuel standard encourages demand and therefore production; which is subsidized.
Precisely in this segment, Valero was able to turn profits from, in 2020. Although the company is the second largest refiner in the U.S, it reported losses of $1,4 billion in 2020. Nevertheless, its renewable fuels segment reported a $638 million profit.
“The internal combustion engine is far from being extinct; the reality is that renewable fuels are going to be part of the future,” said Valero’s CEO Joe Gorder.
Phillips 66 also reported financial results for 2020, with a $4 billion loss. The company also talked about it plans for transition. “We want to participate in energy transition. Therefore, we want to do it where we can invest; earn returns that are above our weighted average cost of capital,” said CEO, Greg Garland.