REFINERY NEWS: Vertex closes sale on Shell Mobile refinery

Refinery: Mobile, Alabama

Vertex said on April 1 it had completed the purchase of Shell Oil's 87,500 b/d refinery in Mobile, Alabama, as it moves forward with plans to complete the conversion of the hydrocracker to produce renewable diesel.

""The acquisition of the Mobile refinery represents a transformative moment in the history of Vertex, one that positions us to become a leading regional supplier of both renewable and conventional products," said Benjamin Cowart, CEO of Vertex in a statement.

"As previously disclosed, we intend to complete the planned conversion of the Mobile refinery's hydrocracking unit by year-end 2022, positioning us to commence production of renewable diesel fuel at the site beginning in the first quarter 2023," he said.

Vertex expects to produce about 10,000 b/d of renewable diesel and renewable byproducts by the end of 2022, ramping up renewable diesel production 14,000 b/d by mid-year 2023.

"To increase feedstock flexibility of this project, [Vertex] is looking at starting a pre-treatment unit at the Myrtle Grove facility in Belle Chasse, Louisiana by year-end 2023," said Credit-Suisse analyst Manav Gupta in a research note.

Vertex will continue to produce conventional hydrocarbon-based fuels as well as renewable diesel at the plant, which runs light, sweet crude.

Vertex signed a crude oil, feedstock and products Supply and Offtake Agreement with Macquarie Commodities and Global Markets. This will provide working capital support for conventional crude and refined products as well as renewable feedstocks and products following the hydrocracking unit modification, beginning in the first quarter 2023.

Vertex bid for the plant during the middle of the coronavirus pandemic lockdown when refining margins were at a low point.

"Today cracks are well above the 5-year average," said Gupta, noting margins showed an $18/b improvement and as of early March's Q4 2021 call and that cracks have risen almost $5/b since then.

"At the time we initiated coverage we expected refining earnings of $30 [million]; in the current environment, this refinery could generate EBIDTA of $90 to $120 [million]," said Gupta.