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Chevron Suspends Biodiesel Manufacturing Due to Market Obstacles
Chevron Suspends Biodiesel Manufacturing Due to Market Obstacles

Chevron Suspends Biodiesel Manufacturing Due to Market Obstacles

  • 04-Mar-2024 11:20 AM
  • Journalist: Emilia Jackson

Chevron Corporation has taken the strategic decision to temporarily idle two biodiesel production facilities situated in the U.S. Midwest. This move, confirmed by the company recently, is attributed to the prevailing challenging market conditions that have impacted the biodiesel sector.

In a significant development back in 2022, Chevron, the second-largest oil producer in the United States, acquired Renewable Energy Group, a prominent biodiesel manufacturer, in a deal valued at $3.15 billion. This acquisition was part of Chevron's ambitious plan to boost its renewable fuels production to 100,000 barrels per day by the year 2030. The acquisition included 10 biodiesel facilities and one renewable diesel plant.

As part of the recent adjustments, Chevron has suspended operations at its biodiesel plants located in Ralston, Iowa, and Madison, Wisconsin. These facilities, collectively capable of processing 50 million gallons of biodiesel annually, are now on hiatus. To put this in perspective, the overall biodiesel production capacity in the United States, as of December, was estimated at 2.07 billion gallons by government sources.

Biodiesel, a fuel derived from agricultural oils and animal fats, is known for its cleaner burning properties compared to traditional petroleum-based diesel. Despite its environmental advantages, biodiesel production is associated with higher production costs. However, it is noteworthy that biodiesel production also generates valuable credits, which can serve to offset some of the production expenses.

Recent market dynamics have seen a decline in biodiesel prices, influenced by a surge in supplies along with a reduction in the value of renewable credits. Notably, renewable credits hit a three-year low recently.

In light of these developments, Chevron has been diversifying its energy portfolio. On March 1, Chevron New Energies, a division of Chevron U.S.A. Inc., unveiled plans for a significant hydrogen production initiative in California’s Central Valley. This forward-looking project aims to generate 5 megawatts of hydrogen, contributing to the company's commitment to sustainable energy solutions.

The hydrogen production initiative is designed to produce lower carbon energy by leveraging solar power, available land resources, and non-potable produced water sourced from Chevron’s existing assets at the Lost Hills Oil Field in Kern County. The project's approach involves the production of low carbon intensity (LCI) electrolytic hydrogen through the process of electrolysis. This method utilizes electricity to separate water into hydrogen and oxygen, showcasing Chevron's commitment to advancing cleaner and more sustainable energy solutions.

Chevron's decision to halt biodiesel production at two facilities underscores the challenges faced by the biodiesel sector in the current market environment. Simultaneously, the company's pivot towards a hydrogen production initiative demonstrates its adaptability and commitment to exploring innovative, sustainable energy solutions in the evolving landscape of the energy industry.

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