Marathon Petroleum Corp. (MPC) announced it has entered into definitive agreements to form a joint venture with renewable energy company Neste for Marathon’s Martinez renewable fuels project, which will convert its refinery in Martinez, Calif., to the processing of renewable diesel fuel.
The partnership will be structured as a 50/50 joint venture with Neste expected to contribute a total of $1 billion, inclusive of half of the total project development costs projected through the completion of the project.
MPC will continue to manage project execution and operate the facility once construction is complete. The closing of the joint venture is subject to customary closing conditions and regulatory approvals, including obtaining the necessary permits, which depend upon certification of a final Environmental Impact Report.
This strategic partnership is expected to advance the current project objectives of delivering low carbon intensity fuels to support California’s climate goals. MPC and Neste will leverage their complementary core competencies in the joint venture.
MPC brings experience in renewable diesel facility conversion, large capital project execution and operating expertise in the California market. Neste brings knowledge in sustainable feedstock sourcing and in renewable liquid fuels production. The joint venture reflects both partners’ commitment to obtain low carbon intensity feedstocks to achieve the project objectives of providing fuels that meet the demand driven by the Low Carbon Fuel Standard (LCFS).
MPC President and CEO Michael J. Hennigan explained that the strategic partnership enhances the Martinez project by leveraging the two companies’ complementary strengths and expertise. It is also consistent with Marathon’s previously announced strategy to source low carbon intensity feedstocks through long-term arrangements, joint ventures and alliances.
“The project will utilize existing processing infrastructure, diverse inbound and outbound logistics, and is optimally located to support California’s LCFS goals while strengthening MPC’s footprint in renewable fuels,” Hennigan said. “Our partnership with Neste signals another step in our commitment to the energy evolution and our focus on lowering the carbon intensity of our operations and the products we manufacture.”
The Martinez facility is currently targeted to have a production capacity of 260 million gallons per year of renewable diesel in the second half of 2022, with pretreatment capabilities to come online in 2023. The facility is expected to be capable of producing 730 million gallons per year by the end of 2023.
Estimated total project costs for Martinez remain at approximately $1.2 billion. Both Neste and Marathon will be responsible for raw material sourcing for the joint venture. The production output will be split evenly between the joint venture partners, and each partner will be responsible for marketing the products under its own brand.
The expected and targeted timelines for achieving the production capacities outlined above are dependent upon the timing of obtaining the necessary permits to operate the facility.
Headquartered in Findlay, Ohio, Marathon operates one of the nation’s largest refining systems. MPC’s marketing system includes branded locations across the United States, including Marathon brand retail outlets.