Resource logo with tagline

Low-carbon crude refinery developer lining up project cap stack

The developer of a low-carbon crude refinery is in talks with banks and strategics to line up project financing for a $5.5bn project in Oklahoma.

Texas-based Southern Rock Energy Partners is holding discussions with banks and potential strategic investors with the aim of shaping a $5.5bn capital stack to build a low-carbon crude refinery in Cushing, Oklahoma.

The project, a first-of-its-kind 250,000 barrel-per-day crude refinery, would make it the first crude facility of that size built in the United States in several decades.

The company is evaluating a project finance route with a debt and equity structure for the project, and has held talks with several major investment banks as well as “industry-leading” strategics in midstream, industrial gas, and electricity generation, Southern Rock Managing Partner Steven Ward said in an interview.

In support of the refinery, the city of Cushing and the Cushing Economic Development Foundation approved $75m in tax-exempt private activity bonds, Ward noted. He added that the company could also tap industrial revenue bonds as well as PACE equity financing.

Seed capital for project development has so far come from strategic partners, some of which are operational partners, Ward said. He declined to comment further on the capital raise, noting that engagement letters have yet to be signed.

Engineering firm KBR is conducting a feasibility study for the Cushing project, and the company is moving through land acquisition, air permit preparation, and EPC selection, Ward said.

While most crude refineries consume natural gas, off-gasses, and ambient air, Southern Rock’s proposed refinery would use oxygen along with blue hydrogen produced from the refining off-gasses and green hydrogen from electrolysis. The process would eliminate 95% of greenhouse gas emissions at the proposed refinery.

“Our furnaces and our process heating units are fed 100% hydrogen and oxygen,” Ward said, noting that this type of system does not currently exist in the market. The company is expanding on technology it licenses from Great Southern Flameless, he said.

The size of the refinery would make it the largest to be built in the US since Marathon Petroleum built a 200,000 barrels-per-day facility in 1976.

Certain other low-carbon crude projects have been in the market for several years. Meridian Energy has been seeking to build cleaner crude refineries in North Dakota. Raven Petroleum ran up against environmental concerns while seeking to build a clean refinery in Texas. And MMEX is aiming to build an “ultra clean” crude refinery in West Texas.

Unlock this article

The content you are trying to view is exclusive to our subscribers.
To unlock this article:

You might also like...

FuelCell Energy closes tax equity financings

In a first-of-a-kind transaction, FuelCell Energy will sell to a pair of investors the hydrogen PTCs generated over a 10-year period from a fuel cell “Tri-gen” system in California.

FuelCell Energy, Inc. has closed on transactions with Franklin Park and Group 1001 Insurance Holdings for two of its clean energy projects—the Tri-gen platform in Long Beach, California, and the new fuel cell park in Derby, Connecticut, according to a news release.

These two transactions include one of the first direct transfer agreements that monetizes both the Investment Tax Credits (ITCs) and Hydrogen Production Tax Credits (H2 PTCs) enabled by the Inflation Reduction Act of 2022 and include a tax credit direct transfer agreement and a tax equity partnership totaling net proceeds of $34.2m. These give FuelCell Energy the financial flexibility to further refine its clean energy technology and to participate in clean energy collaborations and transition projects around the world.

“We are at a critical point on the path towards an energy transition, and it is particularly important to leverage these projects’ long-term, recurring cash flow through tax equity investments from firms like Franklin Park and Group 1001. This allows us to maintain a steady pace of investment in innovation and commercialization efforts and signals that our sustainable clean energy solutions are attracting strong interest from the market,’’ said FuelCell Energy’s President and CEO Jason Few.

Long Beach, California

FuelCell Energy and Toyota Motor North America, Inc. recently announced the completion of the first-of-its-kind “Tri-gen system” at Toyota’s Port of Long Beach operations. The Tri-gen system, owned and operated by FuelCell Energy, produces renewable electricity, renewable hydrogen, and water from directed biogas. FuelCell Energy contracted with Toyota to supply the products of Tri-gen under a 20-year purchase agreement. Tri-gen enables Toyota Long Beach to be the company’s first port vehicle processing facility in the world powered by onsite-generated, 100 percent renewable energy.

1. Tri-gen produces a net 2.3-megawatts of renewable electricity for delivery, part of which will support the Toyota Logistics Services (TLS) Long Beach operations at the port, which processes approximately 200,000 new Toyota and Lexus vehicles annually.

2. The FuelCell Energy Tri-gen system can also produce up to 1,270 kg/day of hydrogen which will provide for TLS Long Beach’s fueling needs for its incoming light-duty passenger fuel cell electric vehicle (FCEV) Mirai, while also supplying hydrogen to the on-site heavy-duty hydrogen refueling station to support TLS logistics, drayage operations, and other heavy-duty FCEV commercial vehicles at the port.

3. Tri-gen’s hydrogen production process can co-produce up to 1,400 gallons of water per day which will be used by TLS Long Beach for car wash operations for vehicles that come into port before customer delivery. This will help decrease the use of constrained local water supplies by up to as much as half a million gallons per year.

Group 1001 and Franklin Park purchased the ITCs from a FuelCell Energy subsidiary that owns Tri-gen, which yielded approximately $6.3 million of net proceeds to FuelCell Energy received by the company in October 2023. In addition, in a first-of-a-kind transaction under the agreement, FuelCell Energy will also sell to the investors the H2 PTCs generated over a 10-year period.

Derby, Connecticut

FuelCell Energy is also completing commissioning of two projects in Derby, Connecticut, for which Franklin Park is providing tax equity financing: a 14-megawatt baseload fuel cell project, which consists of 10 fuel cells, and a 2.8-megawatt baseload fuel cell project, which consists of two fuel cells. The two Derby fuel cell parks serve to fill some of the power generation gap impacting the state.

While fuel cells serve a variety of functions, such as creating hydrogen or capturing carbon, in Derby they are being used to deliver competitively priced, Class I Renewable Energy as part of 20-year power purchase agreements with Eversource and United Illuminating. In Connecticut, a Class I renewable energy source is defined by statute as electricity produced from wind power, geothermal power, or fuel cells.

  • The 14-megawatt baseload fuel cell project supplies power to thousands of customers of Eversource and United Illuminating. It is the second largest fuel cell park in North America following only FuelCell Energy’s Bridgeport, Connecticut, park. The location in Derby was selected by the state, which held a competitive bidding process as part of its efforts to foster distributed utility scale power to enhance energy reliability and grid resilience.
  • The 2.8-megawatt baseload fuel cell project was competitively awarded to FuelCell Energy by Eversource under the Shared Clean Energy Facility program in Connecticut.

Group 1001 and Franklin Park’s tax equity financing commitments for these projects will result in approximately $27.9 million of net proceeds to FuelCell Energy of which approximately $7.3 million of net proceeds were received by the company in October 2023 with the balance expected in the first fiscal quarter of 2024.

Read More »

Fortescue hires from Riverstone for investment arm

Fortescue is looking to bring in equity investors for its projects as part of the formation of a New York-based investment arm.

Fortescue Metals Group Ltd has formed Fortescue Capital, headquartered in New York City, and named Robert Tichio as CEO and managing partner. 

Fortescue Capital is a new green energy investment accelerator platform, and an integral next step in Fortescue’s commitment to deliver green energy projects and decarbonization investments, according to a news release.

Fortescue Energy CEO, Mark Hutchinson, said “Fortescue is taking its global pipeline of green hydrogen and green ammonia projects to Final Investment Decision, and in doing so has communicated our intention and desire to bring additional equity investors onboard. Further, Fortescue has previously communicated its planned investment to decarbonize its Pilbara operations, and we see Fortescue Capital as an essential tool of engagement as we embark on both missions.” 

Before joining Fortescue, Tichio spent over 17 years at Riverstone Holdings, a New York based private equity firm, that has seen total capital raised across a variety of private equity and related products exceed $42bn. 

Tichio will be joined by a senior leadership team with a global background across sustainable infrastructure, climate technology, energy and private markets, which includes Nathan Craig, Rael McNally and Jennifer Zarrilli. 

Each will serve as Managing Directors and be based in New York. 

Tichio reports to Mark Hutchinson, CEO of Fortescue Energy, and the Operating Board of Fortescue Capital, which will initially include Robert Tichio, Jean Baderschneider, Mark Hutchinson and Mark Barnaba. Fortescue Capital is being developed as a fiduciary for third-party capital, which will complement the Energy and Metals internal corporate finance teams that already exist and work collaboratively to serve the shareholders of Fortescue. 

Funding models will differ on a project-by-project basis as projects are formally approved by the Fortescue Board. The Company expects to hold equity stakes between 25 per cent and 50 per cent in each project, with third-party investors. 

These potential capital partners include sovereign wealth funds, pension funds, endowments, insurance companies and ultra-high net worth family offices.

Read More »

Direct air capture firm launches with venture backing

ZeoDAC, Inc. launches with an international group of investment partners that include: Wilson Hill Ventures, Caltech, Coca-Cola Europacific Partners, Freeflow Ventures and Global Brain.

Direct air capture firm ZeoDAC has launched with backing from venture capital and strategic investors, according to a news release.

The company is founded by industry veterans and technical pioneers Professor Christopher W. Jones, an international expert in direct air capture of carbon dioxide technologies from Georgia Tech, and Mark E. Davis, a chemical engineering Professor from Caltech, who has brought multiple academic innovations to commercial success, including zeolite-based processes.

ZeoDAC, Inc. launches with an international group of investment partners that include: Wilson Hill Ventures, Caltech, Coca-Cola Europacific Partners, Freeflow Ventures and Global Brain.

“ZeoDAC’s CO2 capture process leverages chemically and mechanically robust solid sorbents with established supply chains deployed in an energy efficient temperature-vacuum swing adsorption cycle, leading to a simple yet economically advantaged process,” said Christopher Jones.

By combining these innovations and expertise, ZeoDAC aims to provide a compelling economic advantage for large-scale, commercial carbon capture and use. The company has raised several million dollars from institutional venture capital and strategic investors led by Wilson Hill Ventures.

“ZeoDAC can deliver compelling Net Present Value (NPV) to industrial partners on an international scale, enabling a multibillion-dollar market with positive impacts for the climate,” said Ajay Kshatriya from Wilson Hill Ventures.

ZeoDAC not only captures carbon dioxide but also water, allowing for the production of several valuable end-products that can drive an economic return while delivering an environmental benefit.

“We are excited to embark on this journey with ZeoDAC. We believe that Direct Air Capture offers the potential for us to source sustainable ingredients and materials while reducing our environmental footprint. After extensively reviewing the market, we are confident that ZeoDAC’s novel approach provides the affordability, scalability, and energy efficiency needed to become a major player in the DAC industry,” said Nicola Tongue, Associate Director, Coca-Cola Europacific Partners.

Read More »
exclusive

Waste-to-hydrogen developer to close $100m capital raise this month

Raven SR’s C-round of financing is being run by two bulge-bracket banks, and the firm has received widespread interest from private equity and corporate strategics.

Raven SR, a US waste-to-hydrogen developer, is working on a $100m capital raise that’s expected to wrap up this month, according to four sources familiar with the matter.

Raven’s C-round of financing is being run by Barclays and Bank of America. The firm has received widespread interest from private equity and corporate strategics.

Raven CEO Matt Murdock said on the sidelines of the Hydrogen Americas event in Washington D.C. that he was hoping to have the raise done by Thanksgiving.

Headquartered in Wyoming with projects in California and Spain, the company uses a steam/CO2 reforming process that transforms municipal solid waste, organic waste and methane into clean fuels.

In August, 2021, Raven closed on a $20m strategic investment from Chevron U.S.A., ITOCHU Corporation, Hyzon Motors Inc. and Ascent Hydrogen Fund. Samsung Ventures made a strategic investment earlier this year, allowing the company to expand into the Asia-Pacific market.

The company has partnered with INNIO to use its Jenbacher engines to provide renewable power and heat to Raven SR’s first waste-to-hydrogen production facility at the Republic Services West Contra Costa Sanitary Landfill in Richmond, California.

Raven SR plans to bring the plant online in the first quarter of 2023, initially processing up to 99.9 tons of organic waste per day and producing up to 2,000 metric tons per year of hydrogen.

In Aragón, Spain, Raven SR is aiming to bring a second project online in 2023 that will produce 1,600 metric tons per year of renewable hydrogen from approximately 75 tons of organic solid waste per day.

Raven SR recently announced the election of Mark Gordon of Ascent Fund and Michael Hoban of Chevron New Energies to its Board of Directors.

Read More »
exclusive

Midstream hydrogen firm to seek capital for projects within one year

The first slate of the company’s salt cavern hydrogen storage and pipeline projects will likely reach FID within six to 12 months, setting the stage for a series of project finance and tax equity transactions.

NeuVentus, the newly formed midstream infrastructure and hydrogen storage company backed by Lotus Infrastructure Partners, will likely seek project financing and tax equity for its first cache of projects in the Gulf Coast region of Texas and Louisiana in six to 12 months, CEO Sam Porter said in an interview.

“It sure looks like 45V and 45Q, and basically everything the IRA just did, is like a brick on the accelerator,” Porter said, explaining that he expects additional federal clarifications for hydrogen to come this year. “We’re looking at FIDing a first batch of projects, which I think are really going to marry up some things that the project finance community loves.”

That includes salt cavern storage and pipelines with a novel ESG twist, Porter said. The company plans to own and operate its developments as a platform. If in time demand for projects becomes overwhelming, the equity holders could sell those projects.

NeuVentus recently launched with Lotus’ backing. The private equity firm’s position is that they are able and ready to fund all project- and platform-level equity, Porter said.

“There’s certainly project level finance requirements, debt, tax equity and sponsor equity,” Porter said. The company will first get its projects de-risked as much as possible.

Pickering Energy Partners was mandated for NeuVentus’ seed raise. Porter said there could be additional opportunities for financial advisors to participate in fundraising, though Lotus has significant in-house capabilities and relationships.

Vinson & Elkins served as the law firm advising Lotus Infrastructure, formerly Starwood Energy, on the launch of NeuVentus.

The company is also open to acquiring abandoned or underutilized infrastructure assets, convertible to hydrogen, Porter said. Assets that connect production and consumption that can be more resistant to embrittlement than newer midstream infrastructure and would be of interest.

Exiting assets in regions that are good for hydrogen production, namely those that are sunny and windy, and are relatively close to consumption, will get the closest look.

Oil & gas in the energy transition

Renewable-sourced hydrogen offers an opportunity for traditional oil and gas operators to continue their work in salt domes.

NeuVentus’ plan is to focus on storage first, and then have the pipeline emanate from that, Porter said. The founding team of the company has a lot of experience in oil & gas and structuring land deals (mineral rights and surface/storage rights) in the Gulf region, where salt caverns are abundant.

The company is also open to an anchor tenant that needs a pipeline segment between production and consumption. But from a developers’ perspective the most prudent play will be around storage sites located with multiple interconnection options, he said.

There are roughly 1,500 miles of pipeline and 9 to 10 million kilograms of daily hydrogen production and consumption in the Texas and Louisiana Gulf region, Porter said.

“I think we’re going to see a significant need for more midstream build-out,” he said. “The traditional fee-for-service model is going to be appealing to a lot of the new entrants.”

A molecule-agnostic approach

Hydrogen is “a Swiss army knife” of a feedstock for numerous use cases, Porter said. That all of those use cases will prevail is uncertain, but NeuVentus ultimately only needs one or two of them to grow.

“Additional hydrogen infrastructure is going to be required,” whether it’s for ammonia as fertilizer or methanol as fuel or something else, Porter said. “We don’t necessarily care: all of them are going to require clean hydrogen.”

Equity owners in NueVentus will be opportunistic when it comes to an eventual financial exit, Porter said.

“The beauty of this is that I can see a number of potential buyers,” he said.

An offtaker that wants to vertically integrate, like foreign consumers of hydrogen products, could want to acquire a midstream platform for purposes of national energy security. Industrial gas companies could want to acquire the infrastructure as well. Large energy transfer companies that move molecules are obvious acquirers as well, and finally the company could remain independent or list publicly under its own business plan.

Read More »
exclusive

Hydrogen liquefaction provider looking for growth equity

An emerging liquid hydrogen and liquefaction management company is seeking equity to support manufacturing expansion in Europe and the US.

Absolut Hydrogen, a French liquid hydrogen and liquefaction company based in Grenoble, is looking for equity to scale up production following operations of their demonstration project in France, CEO Jerome Lacapere said in an interview.

Absolut has a partnership with SAF firm ZeroAvia to develop refueling infrastructure for aircraft, and is primarily focused on serving the mobility sector.

A subsidiary of Groupe Absolut, the company offers a full LH2 product range with an entry small-scale hydrogen liquefaction system (< 50 kg/day), a 100 kg/day Turbo-Brayton based H2 liquefier and a 1T/day liquefier based on the same technology.The company's liquefaction demonstration plant in France should produce 100 kg per day, Lacapere said. After that Absolut will need new investment to scale production.Longer term the company has its sites on the US transport market, Lacapere said.“We need to grow in the United States,” Lacapere said. The company will need US-based advisory services and offices in the country to do that, he said.

Read More »

Welcome Back

Get Started

Sign up for a free 15-day trial and get the latest clean fuels news in your inbox.