Vertex Energy, Inc. (NASDAQ: VTNR) has provided an update on its Mobile, Alabama Refinery renewable diesel conversion project.
Mechanical completion of the project has been proactively extended from its initial target of year-end 2022 to the first quarter of 2023, Vertex noted, highlighting that the change came about after a thorough review of project execution risk by the company.
The 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, Vertex outlined. Production from the project is now anticipated to begin in the second quarter of 2023.
Vertex management estimates that its decision to extend the project timeline will result in a positive impact to the fourth quarter 2022 gross margin of approximately $15 million to $17 million by maintaining current operations through year end 2022, assuming refining spreads at the time of the announcement, which was made on September 12.
“I am pleased with the team’s ability to remain nimble in a highly dynamic market environment,” Benjamin P. Cowart, the president and CEO of Vertex, said in a company statement.
“While 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,” he added in the statement.
“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,” Cowart continued.
Vertex highlighted that the renewable diesel project is a $90 million - $100 million development designed to modify the Mobile Refinery’s existing hydrocracking unit to produce renewable diesel fuel on a standalone basis. On completion of the project, the refinery is expected to produce approximately 8,000 - 10,000 barrels per day of renewable diesel. Output volumes are anticipated to subsequently ramp up to approximately 14,000 barrels per day.
The Vertex Refining Alabama LLC Mobile site is located on the U.S. Gulf Coast and distributes its finished product (diesel, jet fuel, vacuum gas oil, gasoline) across the southeastern United States through a high-capacity truck rack, together with deep and shallow water distribution points capable of supplying waterborne vessels, Vertex’s website highlights. The asset’s olefins feed hydrocracker was originally built to produce olefins for chemical manufacturing.
Back in April, Vertex announced the completion of the acquisition of the Mobile, Alabama refinery and related marine terminal and logistics assets from Equilon Enterprises LLC d/b/a Shell Oil Products US, Shell USA, Inc. and Shell Chemical LP for a base purchase price of $75 million in cash, together with approximately $25 million related to specified capital expenditures and other closing adjustments.
In March, Vertex highlighted that, during the first quarter 2022, the company entered into a definitive agreement with Haldor Topsoe, a global provider of carbon emission reduction technologies for the chemical and refining industries, to lead the technology implementation of the planned conversion of an existing hydrocracking unit at the Mobile Refinery, upon closing of the acquisition. In a company statement at the time, Vertex noted that the Mobile Refinery’s hydrocracker was uniquely suited for renewable diesel production, “requiring a low complexity conversion process”.
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