HollyFrontier plans to double capex in 2021, boost renewables spending

U.S. refiner HollyFrontier Corp has outlined plans to nearly double its capital expenditure in 2021, boosting its renewables investment and counting on an expected recovery in fuel demand after the coronavirus pandemic tanked consumption.

The refiner said it plans to spend between $1.05 billion and $1.15 billion next year, up from the $475 million to $550 million slated for 2020. This year the coronavirus pandemic slashed driving and sent the global economy into a tailspin, leading refiners to decrease output and figure out how to stay profitable in a year of little demand.

U.S. refiners’ utilization rate is still down more than 10 percentage points from the same time last year, Energy Information Administration data showed. 

Including its unit Holly Energy Partners LP, the company expects to spend between $1.09 billion and $1.21 billion in 2021.

The Dallas, Texas-based refiner said it would spend around $500 million to $530 million on its renewables business next year, compared with $130 million to $145 million in 2020.

The coronavirus pandemic has decreased demand for traditional fuels like gasoline and diesel and in some instances has accelerated refiners’ plans to increase investments in renewable fuels. HollyFrontier was one of a handful of refiners earlier this year to announce a move toward renewable diesel, made from feedstock such as used cooking oil from fast-food restaurants.

With renewable diesel, refiners can take advantage of incentive programs, in particular California’s Low Carbon Fuel Standard, in which refiners can generate tradable credits with production of lower carbon-intensive fuels. Refiners can sell the credits to other fuel producers for profit.

Meanwhile, Democratic President-elect Joe Biden has pledged to move the United States to a zero-carbon emissions scheme by 2050, and legislation supporting demand for products like renewable diesel could garner bipartisan support.

Earlier this year, HollyFrontier converted a 52,000-barrel-per-day refinery in Cheyenne into a renewable diesel plant and said it plans to spend about $650 million to $750 million over the next 18 months to expand its renewables portfolio.

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