Biodiesel Market. AFOA Conference 2014 John S. Cusick RBF

Transcription

1 Biodiesel Market AFOA Conference 2014 John S. Cusick RBF

2 Company Highlights Company Info: Headquarters: Houston, TX Founded: 2006 Plant Location: Port Neches, TX Operations Start Date: Late 2008 Premier operating asset in the industry in terms of: Scale single largest biodiesel production site in North America Flexibility pretreatment system enables use of lower grade soy and blending with higher FFA feedstocks such as used cooking oil Location plant is in the refining and petrochemical production region of the Texas Gulf Coast and is connected to a deepwater dock, giving it unparalleled market access Quality RBF is a BQ-9000 certified producer in its fifth year of operation, with an established reputation for delivering quality product from a variety of feedstocks Operating costs several factors in addition to scale enable RBF s plant to realize lower processing costs than its competitors, including a unique synergistic relationship with Huntsman Petrochemical, from whom site utilities, certain process chemicals, and other services are obtained at cost Expandability plant capacity can be doubled on existing site Storage 7 million gallons of feedstock storage and 10 million of biodiesel storage Logistical optionality existing deepwater dock with barge and ship capability; connected to a Tier 1 rail line; brand new marine dock fully permitted and designed; could, with minimal investment, tie into fuel pipelines if approved for biodiesel blends R&D capability plant site includes state-of-the-art laboratory unrivaled in the industry Plant Info Description: BQ-9000, Multi-feedstock biodiesel production facility Byproducts: Glycerin Storage: Over 17 million gallons Logistical Access: Barge, ship, rail and truck (possibly pipeline) Privileged and Confidential 2

3 US Biodiesel - present challenges Expiration of the IRS Blender s Tax Credit: as has been the case in both 2010 and 2012 the US Biodiesel market is moving through another year of uncertainty marked by the lapse of the $1 per gallon tax credit, perhaps even more complicating is the strong precedence in place from the two past occurrences in which it was retro-actively re-instated at the end of the year during the lame duck session of Congress Yet to be finalized 2014 RVO: compounding the btc situation this year the EPA has yet to issue the final RVO s for the 2014 year. Privileged and Confidential 3

4 What is the Biodiesel Complex? RINs LCFS Credits Agri Input Biodiesel Energy Output BTC 4

5 BOHO Spread 1 Year 5

6 BOHO Spread 10 Year 6

7 Correlation of BOHO Spread and Argus SME Premium Suggests an approximate 70% correlation

8 Argus SME Premium vs BOHO Spread 8

9 Feedstocks 10 Year 9

10 Feedstocks

11 Feedstocks

12 High FFA Feedstock Values Q Traditional discounts for High FFA feedstocks relative to the price of Soybean Oil narrowed across

13 High FFA Feedstock Values Today Ø Does the anticipated CA LCFS demand re-start in 2015 and in turn a firming LCFS credit drive High FFA feedstock prices in the coming years? Ø Will EU double counting and potential Low CI transition drive High FFA values pricing further? Ø Expectation for further demand of high FFA/Low CI feedstocks with Canadian, OR and WA LCFS/GHG market coming online 13

14 California Market LCFS Program California represented 6.4% of the total US distillate demand by end user and 7.2% of the total US on-highway distillate demand (as of 2012). Major US Oil Refiners and blenders typically use the on-highway diesel pool for biodiesel blending, as the California market makes less use of pipelines as the rest of the United States distillate market. Blends up to 20% are common during summer months, although blends over 5% must be disclosed to comply with labeling laws. Assuming 5% blending of total non-vessel bunkering distillate demand, potential California biodiesel blend demand is projected to exceed 182 mm gal/year. Source: EIA (in million gals) 14

15 LCFS Credit Values 15

16 California LCFS Program Questions Ø DCO will it remain the golden child input for the program with regards to Biodiesel and RD production? Ø When will the market on LCFS credits kick in again? Ø Why is the disparity between the LCFS credit market (The Jacobsen, OPIS, Argus reporting) and the program s reported trade values differ? Ø Are Biodiesel stakeholders watching the NOx issue that is being well supported by Petroleum and even RD interests in Sacramento and is poised to create a 9.5% blend-wall for Biodiesel in the California market? AQMD (Air Quality Management District) is the main obstacle, but is the supporting science still valid? Is the Biodiesel industry at the table? 16

17 2012 RIN Market 2012 RIN Prices (Argus) E12 B12 A /3/12 2/3/12 3/3/12 4/3/12 5/3/12 6/3/12 7/3/12 8/3/12 9/3/12 10/3/12 11/3/12 12/3/12 17

18 2013 RIN Market 2013 RIN Prices (Argus) E13 B13 A /2/13 2/2/13 3/2/13 4/2/13 5/2/13 6/2/13 7/2/13 8/2/13 9/2/13 10/2/13 11/2/13 12/2/13 18

19 2014 RIN Market 19

20 Forward BOHO Curves 20

21 2014 RIN Market YTD given the prevailing RVO thinking Ø On track to easily achieve 1.28 B provisional RVO = Bearish B14 Ø Or is it.. August EMTS Update 21

22 Import Arbs The RFS2 program, has become an International program with the 2013 and now 2014 trading years spotlighting this reality Argentine D4 imports D6 PME imports D6 Palm based RD along with Low CI, D4 based RD imports South Korean UCOME D4 and LCFS generation EU D4 generating imports Critical for US Market to understand scope of these imports and in turn incorporate these volumes into 2015 and onwards RVO calculations 22

23 What is the Biodiesel Complex? RINs LCFS Credits Agri Input Biodiesel Energy Output BTC 23

24 The Biodiesel Complex: The Reality CA LCFS: If RFS2 wasn t complicated enough RINs D4 D5 Weather Energy Cost D6 Geopolitical Agri Input Biodiesel Energy Output VVO High FFA ILUC Sustainability Food vs Fuel BTC Retro Dynamic Profit Sharing?? ULSD Heating Oil 24