Preem cancels Lysekil refinery project to prioritise renewables production

Swedish refiner Preem AB, a wholly owned subsidiary of Corral Petroleum Holdings AB, Stockholm, and US-based project developer Beowulf Energy LLC, New York, have scrapped their previously announced plan to build a residue hydrocracking plant – or residue oil conversion complex (ROCC) – at Preem’s 220,000-b/d refinery in Lysekil, Sweden.

In light of new economic circumstances caused by the coronavirus (COVID-19) pandemic, Preem’s board has decided to cancel the Lysekil ROCC project as well as withdraw and amend the refinery’s 2016 environmental permit application – of which the project formed a sizeable part – to focus instead on projects centred around renewable production at the site, the company said on the 28^th September.

Designed to reduce production of sulphur-rich, heavy fuel oil in favour of low-sulphur products such as diesel and gasoline, the ROCC project was an innovative but technically difficult and costly project in which COVID-19’s effects on the global energy sector have undermined the economic logic of investment, according to Preem.

“The closure of ROCC is a necessary commercial decision based on an assessment of profitability and technical feasibility,” said Magnus Heimburg, Preem’s newly appointed chief executive officer.

Already Sweden’s largest producer of renewable transport fuels, Preem said its highest priority now is to expedite its ongoing programme aimed at producing renewable fuels at the Lysekil refinery.

With cancellation of the ROCC now freeing funds to be concentrated on projects enabling increased production of renewables, Preem plans to submit a new environmental permit application for the Lysekil refinery that will enable large-scale production of renewable fuels.

The operator also said it plans to ramp up renewable fuels production at its 125,000-b/d refinery in Gothenburg, at which the country’s largest production plant for renewable diesel and aviation fuel already is under development.

Scheduled for start-up in 2024, the new 16,000-b/d renewables unit – which will be completely dedicated to producing renewable fuels from tall oil, tallow, and other renewable feedstocks – will produce about 1 million cu m/year of fuels, which corresponds to about 25% of Sweden’s estimated consumption of renewable fuels in 2030 and will enable reduced carbon dioxide (CO₂) emissions from cars and planes by 2.5 million tonnes/year.

The environmental permit process for the Gothenburg unit is now under way and under review in Sweden’s Land and Environmental Court, Preem said.

“The reprioritisation is an important step in accelerating the transition at both of our refineries from fossil fuel production to renewables [and] is a positive step in our commitment to the Green Agenda,” Mr Heimburg said.

“Focus on renewable fuels is the cornerstone of Preem’s overall and long-term business strategy. In a situation where tough decisions have to be made, it is crucial for Preem to allocate resources to those projects that will accelerate our renewable production fastest and

most cost-effectively, he added.

The Gothenburg renewable fuels plant and reprioritisation at Lysekil come as part of Preem’s broader plan to become the world’s first climate-neutral petroleum and biofuels company with net zero emissions across its entire value chain before 2045. The operator also previously said it plans to increase its renewable fuel production to five million tpy by 2030.

Preem also confirmed in 2019 that it intends to build a full-scale carbon capture plant at the Lysekil refinery to reduce CO₂ emissions by one-third by 2025 following a demonstration project at the site which began in 2019 and will run to 2021.

Preem said the Swedish government, which has decided on a more ambitious blending mandate in the country, also has announced a willingness to support investments in domestic production of renewable fuels, thereby improving the investment climate for renewables-based projects.

Source: Oil & Gas Journal