In a venture to produce cleaner energy, big oil is turning to soybean oil. In April, Phillips 66 announced it is securing feedstock for the company’s growing portfolio of renewable fuels projects by investing in a new soybean-processing plant in Iowa. Phillips 66 isn’t alone — Love’s also made a similar announcement with Cargill.
“There’s a huge difference between what we typically know is biodiesel versus renewable diesel,” says Peter Meyer of S&P Global Platts. “You have states on the West Coast, and other states throughout the heart of the country, looking at low carbon fuel sources. In other words, they are going to give better fuel credits for renewable biodiesel that is made with certain feedstocks.”
The feedstocks of choice are fats, tallows and greases, Meyer adds. However, the U.S. doesn’t produce enough of those sources to meet the growing need.
“We only produce maybe 12 billion pounds of those combined on a yearly basis in the U.S., he explains. “But now, all of a sudden, we see all these oil companies getting into deals. Love’s has a deal with Cargill on fats and tallows. We just saw Valero come out with Darling, who’s the largest renderer in the country. However, they came out and said there’s no more used cooking oil left for renewable diesel.”
As Phillips 66 outlines its commitment for the future, Meyer says it’s a big deal that Phillips 66 is getting into the renewable fuels arena and investing in a soybean plant.
“This strategic investment expands our reach into the renewable diesel value chain and provides secure feedstock,” stated Brian Mandell, Phillips 66 Executive Vice President of Marketing and Commercial, in a company press release. “It also reflects our commitment to play an important role in a lower-carbon energy future.”
Meyer says Phillips 66 will have a minority share in the plant, but there are some details soybean producers should pay close attention to.
“If you look at the contract, the contract says they have first right of refusal on 100% of the soybean oil produced from that plant,” Meyer says.
He says the recent price action in the soybean market proves there is a lot of speculative money in the soybean oil market at the moment.
