Chevron Corp. CVX 1.23% is making one of its largest investments in renewable fuels, paying $3.15 billion to buy a company that makes diesel and other fuels from sources such as corn or cooking oil as the fossil-fuel giant faces investor pressure to invest in green energy.
The purchase of Iowa-based Renewable Energy Group Inc., REGI 40.06% which has 11 refineries that source mainly from waste products such as tallow or used cooking oil, will help Chevron in its quest to offer a bigger variety of fuels with lower carbon footprints than oil and natural gas. Chevron plans to continue making acquisitions in the area, and will spend money to convert existing refineries so they can process low-carbon fuel sources, Chief Executive Mike Wirth said.
“We’re creating a system here, not just buying a business to plug in,” Mr. Wirth said. “It is building capabilities to do things that are very analogous to what we’ve historically done, with a wide variety of feedstocks.”
In a sign of the importance of the Renewable Energy Group deal, Chevron said REG’s president and chief executive, Cynthia J. Warner, is expected to join Chevron’s board, and Chevron’s renewable-fuels business will move its headquarters to Iowa.
The REG acquisition comes as Chevron, along with other big oil and gas companies, faces intense pressure to overhaul their businesses to reduce the fossil-fuel-generated carbon emissions that are a main contributor to global warming. Chevron said last year it will triple spending on its low-carbon unit, pledging to spend $10 billion through 2028 on biofuels, hydrogen production, carbon capture and other technologies, up from a prior commitment of roughly $3 billion.
Part of Chevron’s strategy is to boost production of renewable fuels: gas, diesel and oil typically made from organic or waste materials that generate less carbon dioxide over the course of their manufacturing and consumption than fossil fuels.
The company said last year that it hopes to produce 100,000 barrels of renewable diesel by 2030. That is a volume big enough to supply California-based Chevron’s current diesel customers on the U.S. West Coast, which is implementing some of the country’s most aggressive clean-fuel programs.
The acquisition of Renewable Energy Group acquisition will help meet that goal because it has a renewable-diesel facility that it is expanding to a capacity of 20,000 barrels a day, said Mark Nelson, Chevron’s executive vice president in charge of its downstream and chemicals business, who is overseeing the renewable-fuels push.
Chevron is also pouring money into renewable gas, initially by tying up with companies that produce the fuel from dairy-cow manure.
Chevron last year announced a joint venture with U.S. agriculture giant Bunge Ltd. BG -1.56% to develop more sources of renewable fuels, such as oils from soybean processing plants.
Write to Phred Dvorak at [email protected]
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