Global Feedstock Sourcing
Components of Our Feedstock
Given the importance of feedstock to our operations, Chevron Renewable Energy Group employs a multifaceted sourcing strategy. These actions provide for our future growth and help protect against supply chain risks, including availability concerns, pricing sensitivities and other impacts associated with our supply chain.
Bio-based diesel can be produced from virtually any biogenic fat or oil. However some feedstocks are harder to process, may produce different product yields and can result in substantially different characteristics. Many bio-based diesel producers only leverage refined vegetable oils, such as soybean oil or canola oil, which are typically easier to source and process. Chevron Renewable Energy Group has developed proprietary technology that enables us to use a wide variety of feedstocks, including harder-to-process materials such as distillers corn oil (DCO), rendered animal fat and used cooking oil (UCO). These harder-to-process materials are typically considered waste from other industries and therefore less carbon intensive and more valuable in lower carbon markets. Our feedstock flexibility allows us to better adapt to market changes, helping to make us and our customers less susceptible to price and supply issues. It is also advantageous for our suppliers, as we are usually better equipped to accommodate unforeseen supply chain challenges.
Strong Supply Network
Our 25 plus years in the industry have allowed us to develop a strong supply network and we have built trusted relationships with our feedstock suppliers. We source our feedstocks from over 100 vendors worldwide, in quantities ranging from truckload to railcar to marine vessel. At the end of 2021, over 95% of our suppliers had been with us for over five years and more than 70% for over 10 years. Our long-standing suppliers have grown with us, and we fuel added growth by seeking out new sources and suppliers as well.
Contracts and Hedging
The prices for feedstocks and bio-based diesel, including the value associated with government incentives, can be volatile and are not always closely correlated. Lower-carbon feedstocks are particularly difficult to risk manage given that such feedstocks are not traded in any public futures market. To manage feedstock and bio-based diesel price risks, we utilize forward contracting, hedging and other risk management strategies, including the use of futures, swaps, options and other over-the-counter products.
In establishing our risk management strategies, we draw from our own in-house risk management expertise and consult with industry experts. We utilize research conducted by outside firms to provide additional market information and risk management strategies.
Feedstock Innovation, Research and Development
We are excited by the feedstock innovation occurring that will support the growth of our industry. Through funding, collaborative research and business development, we work with developers of next generation feedstocks, such as algae and cover crops, to assist them in developing and commercially scaling up these emerging technologies. Not only do these new feedstocks provide an additional supply for our industry, but many have added advantages. For example, cover crops can produce useful meal, oil and contribute to regenerative agriculture through improved soil health, carbon sequestration and waterway protection. Cover crops can be planted between growing seasons of traditional crops such as corn and soybeans providing farmers the opportunity to grow three crops in two seasons.
We also partner with companies and universities to further advance the science of biofuels. In 2021, we partnered with Iowa State University to create a hydrotreater pilot plant to understand how various biomass feedstocks can play a role in the production of renewable fuels with a specific focus on renewable diesel. The research will specifically support our Geismar facility by helping to evaluate new lower carbon feedstocks and optimize production of renewable diesel and sustainable aviation fuel.
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