Marathon Petroleum Corp. and Neste Corp. on March 1 announced they have entered into definitive agreements to form a 50/50 joint venture to produce renewable diesel following a conversion project at Marathon’s existing refinery in Martinez, California.

Marathon has been working to convert the Martinez facility to renewable diesel production for several years. A permit application for the project was filed with local regulators in October 2020. The company announced in March 2021 that its board of directors had officially approved plans for the Martinez conversion project. A draft environmental impact report for the project was published in October 2021 and subject to a 60-day public comment period that closed in mid-December. During a fourth quarter earnings call held Feb. 2, 2022, Marathon President and CEO Michael Hennigan confirmed that engineering for the Martinez conversion project is complete and said the company is ready to begin construction. The first phase of the conversion project is expected to begin operations during the second half of 2022, enabling the production of approximately 260 MMgy of renewable diesel. The second phase of the project is expected to boost renewable diesel production capacity to 730 MMgy by the end of 2023.

The Martinez conversion project is the second large-scale renewables conversion project undertaken by Marathon. The company has completed a similar conversion project at its refinery in Dickinson, North Dakota. That project, with a capacity of 180 MMgy, began operating at full capacity during the second quarter of 2021.

The Martinez project will now be structured as a 50/50 joint venture with Neste. Neste is expected to contribute $1 billion to the project, inclusive of half of the total project development costs projected through the completion of the project. Marathon will continue to manage project execution and operate the facility once construction is complete.

Both Neste and Marathon will be responsible for feedstock sourcing for the joint venture. The production output will be split evenly between the joint venture partners, and each partner will be responsible to market the products under its own brand and responsibility.

The joint venture will boost Neste’s renewable products capacity by approximately 365 MMgy, or slightly more than 1 million metric tons. The company already produces renewable diesel at refineries located in Finland, the Netherlands and Singapore. Those three refineries currently have the capacity to produce approximately 3.3 million metric tons of renewable diesel annually, with a planned expansion in Singapore that will boost capacity to 4.5 million metric tons per year. Once the Singapore expansion is complete and the Martinez conversion project is complete next year, Neste will have the capacity to produce approximately 5.5 million metric tons of renewable fuels, including renewable diesel and sustainable aviation fuel (SAF).

"We're excited to partner with Neste as this strategic partnership enhances our strong Martinez project by leveraging our complementary strengths and expertise and is consistent with our previously announced strategy to source low carbon intensity feedstocks through long-term arrangements, joint ventures and alliances, “Hennigan said. “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. 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."

“This is a very important step in our renewables growth strategy execution,” said Peter Vanacker, president and CEO of Neste. “The location of the facility is in the middle of the growing renewable fuel market in California. The partnership will further strengthen our footprint in the United States, as we will have a broad value chain that covers feedstock sourcing to renewables production and sales in the US. We are thrilled to partner with Marathon: we both share an ambition in offering more high-quality, lower-emission renewable products, thus helping customers to achieve their sustainability goals.”

“We have committed to helping our customers decrease their greenhouse gas emissions by at least 20 million tons of CO2eq annually by 2030,” Vanacker continued. “This joint venture will help us in exceeding our commitment as it will bring a substantial amount of renewable diesel to our customers in the US. Our ongoing Singapore expansion project and this joint venture will increase our total production capacity of renewable products to 5.5 million tons by the end of 2023 and we will be the only global provider of renewable products with a production footprint in North America, Asia and Europe. As announced in Neste's Financial Statement Release 2021, the project for a possible next worldscale renewables refinery in Rotterdam is in the engineering phase and we are approaching readiness for a final investment decision during the next months.”

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.