Valero joins partnership to develop industrial Midwest CCS pipeline system

New York — Valero Energy and BlackRock Global Energy & Power Infrastructure Fund will partner with Navigator Energy Services to build an industrial scale carbon capture and storage pipeline system.

Valero, the largest renewable fuel producer in the US and a first mover into renewables among US refiners, will be an anchor shipper on the system, which could be expanded to 8 million mt depending on Navigator's ability to engage other shippers through an open season.

"The CCS project seeks to provide biorefineries and other industrial participants a long-term, economic path to materially reduce their carbon footprint while maximizing the value of their end-product in a cost-effective manner that is safe for the environment," said Valero in its March 16 statement.

The first phase will have more than 1,200 miles of new CO2 gathering pipelines across five Midwest states -- Nebraska, Iowa, South Dakota, Minnesota, and Illinois -- and will be capable of storing up to 5 million mt of CO2 each year in Illinois.

"[Valero] VLO is already leading the charge in renewable diesel with two best-in-class projects at St. Charles (DGD 2) and Port Arthur (DGD 3)," wrote Credit-Suisse analyst Manav Gupta in a March 16 research note.

"With today's announcement the company has demonstrated its commitment to energy transition through innovation in renewables. We believe as [Valero] continues to lead in development of lower carbon fuels for the future," he added.

Navigator will lead the construction and operations of the system, with start-up to begin in late 2024.

Navigator is also seeking additional commitments to utilize the remaining capacity via a binding open season process currently underway.

"Prior to participating in the non-binding open season, interested parties must execute a confidentiality agreement to govern the receipt of the open season documentation. All potential shippers must submit non-binding information by 12:00 p.m. Central Time on April 30, 2021 as an expression of interest to continue in the binding process," the statement said.