Vertex Energy, Inc. (Houston), a leading specialty refiner and marketer of high-quality refined products, announced that it has entered into a definitive agreement to acquire the Mobile refinery (“Mobile”) located in Mobile, Alabama from Equilon Enterprises LLC d/b/a Shell Oil Products US, Shell Oil Company and Shell Chemical LP (“Shell”), subsidiaries of Royal Dutch Shell plc, for $75 million. The transaction is expected to close during the fourth quarter 2021, subject to regulatory clearance and various closing conditions.
Vertex will become the sole owner and operator of the Mobile refinery upon closing. The refinery, which has a long track record of safe, reliable operations and consistent financial performance, will become Vertex’s flagship refining asset upon the close of the transaction, positioning the Company to become a pure-play producer of renewable and conventional products.
The 91,000 barrel-per-day Mobile refinery is a strategically located asset, one capable of sourcing a flexible mix of cost-advantaged light-sweet domestic and international feedstocks. The Mobile refinery has the optionality to run as a stand-alone refinery and is also capable of producing base oils and chemicals feedstock. Approximately 70% of the refinery’s current annual production is distillate, gasoline and jet fuel, with the remainder being vacuum gas oil, LPG and other products. The facility distributes its finished product across the southeastern United States through a high-capacity truck rack, together with deep and shallow water distribution points capable of supplying waterborne vessels. As part of the transaction, Vertex will acquire approximately 3.2 million barrels of product storage, inventory, logistics and distribution assets, together with more than 860 acres of developed and undeveloped land. Vertex expects to retain the approximately 200 employees currently engaged in the business being acquired.
Upon completion of the transaction, Vertex expects to initiate an $85 million capital project designed to modify the Mobile refinery’s hydrocracking unit to produce renewable diesel fuel on a standalone basis. Upon completion of the project, which is expected to conclude by year-end 2022, the refinery will commence production of approximately 10,000 barrels per day of renewable diesel, increasing to 14,000 bpd by mid-year 2023, while continuing to supply conventional fuels to the regional market at current rates.
Renewable diesel is a biofuel that can be produced from organic waste and vegetable oils. Renewable diesel is a sustainable, fungible replacement for petroleum-based diesel fuel. While California remains the primary market for domestically produced renewable diesel, given the economic benefits for its use under the state’s Low Carbon Fuel Standard, other states are expected to follow suit, creating significant, incremental demand during the next decade. Once operable, the Mobile refinery’s converted hydrocracking unit will be capable of processing a wide range of organic, pre-treated feedstocks, including soybean and corn oil, meat tallow and waste vegetable oils, among others.
Vertex expects the average gross profit per barrel on its renewable diesel production will be significantly higher than that of the Mobile refinery’s conventional fuels production, including the benefit of tax subsidies and carbon-reduction incentives. As this project involves the conversion of an existing, operating process unit, Vertex anticipates that both the capital cost and anticipated time-to-market will be significantly less than that of comparable greenfield conversion projects.