(Calgary) Imperial Oil provided an update on what will be Canada’s largest renewable diesel facility, saying construction of the complex near Edmonton is progressing well and is expected to be completed next spring.
The $720 million project underway at its Strathcona refinery is expected to have an annual production capacity of more than a billion litres of renewable diesel.
The facility will use locally sourced vegetable oils and low-carbon hydrogen to produce biomass fuel, helping Imperial prepare for the energy transition by diversifying its petroleum product portfolio, the company said.
President and CEO Brad Corson told analysts on a conference call Friday that the company remains pleased with its decision to proceed with the project, despite the fact that a recent glut of renewable fuel supplies south of the border is hurting margins for producers in the United States.
“It’s important to differentiate the market that we’re looking at and the economic drivers for us, versus maybe what you’re seeing in other markets like the U.S.,” Corson said. “For us, we continue to view this as a highly economic project.”
Renewable diesel is chemically equivalent to petroleum diesel. This means it can be transported directly in pipelines or sold at retail stations without infrastructure modifications or fuel blending.
That makes it an attractive proposition for refiners in the face of climate-focused regulations like Canada’s Clean Fuel Standard that require liquid fuel suppliers to gradually reduce the carbon intensity of the fuels they produce and sell in Canada.
According to the Canada Energy Regulator (CER), increased production of renewable diesel is one way for the country’s fuel producers to meet the federal target of reducing the emissions intensity of their products by 15% below 2016 levels by 2030.
The REC says that if countries are to meet their stated climate commitments, 35% of the global diesel supply could be renewable diesel by 2050.
Canada’s first stand-alone renewable diesel complex, built by Tidewater Renewables in Prince George, B.C., was completed last year, and a handful of other projects are proposed across the country.
But in the United States, renewable diesel production has jumped sharply. Since 2021, production capacity for renewable diesel and other biofuels has more than tripled, according to the U.S. Energy Information Administration.
Additionally, the many renewable diesel facilities must compete for the raw materials they need to make the product. (Renewable diesel can be made from vegetable oil, animal fats, used cooking oil, or even algae.)
No significant transport costs
Mr. Corson told analysts on Friday that the challenges facing the U.S. renewable diesel market are not a problem for Imperial.
We designed this facility to process agricultural raw materials, oils available in the region in general. We source from crops and farms that are relatively close by, so there are no significant transportation costs.
Imperial President and CEO Brad Corson
“What’s also unique compared to what you see in the United States is the regulatory environment that we have here,” he added, noting that regulatory incentives at the provincial level combined with the federal clean fuel standard provide greater economic support for Canadian projects.
“All of these things put us in a different, but much better, place than you might see in the United States.”
Imperial saw a significant increase in its net profit in the second quarter, which reached $1.13 billion, compared to a net profit of $675 million a year earlier.
The progression observed during the period ended June 30 shows a profit of $2.11 per share on a diluted basis, compared to $1.15 per share in the second quarter of 2023.
Imperial attributed the profit growth to the combined benefits of stronger North American crude prices and the opening of the Trans Mountain pipeline expansion, which helped reduce the discount Canadian producers typically take on their oil because of lack of export access.
Total revenues and other income were $13.38 billion, up from $11.82 billion a year earlier.
Imperial said production averaged 404,000 barrels of crude oil equivalent per day in the quarter, up from 363,000 a year earlier.
Refinery throughput for the quarter averaged 387,000 barrels per day, compared with 388,000 barrels per day a year earlier.