INSIGHT: Case remains for LyondellBasell to convert refinery to sustainability hub

Al Greenwood


HOUSTON (ICIS)–LyondellBasell still can make a strong case for converting its refinery in Houston into a sustainability hub, even though it is delaying its exit from the refining business to the end of the first quarter of 2025.

  • The refinery has the right mix of processing units, logistics, access to feedstocks and government incentives to become a hub for sustainable chemicals and fuels
  • The refinery is connected by pipeline to a nearby cracking complex in Channelview, which could convert sustainable feedstock produced by the sustainability hub into olefins
  • When LyondellBasell announced the delay, the company said it expects the refining site to become part of a regional hub for its Circular and Low Carbon Solutions business and support the growth of its Circulen line of sustainable products

The company originally planned to end operations at the 268,000 bbl/day Houston refinery by end 2023. It is delaying the exit because of favourable inspections and consistent performance. The delay will also allow LyondellBasell to have a smoother transition between shutting down the refinery and implementing the retrofitting and circular projects needed to convert the complex into a sustainability hub.

Comments and announcements made over the past several months are providing clues about how that conversion project could take shape.

The latest clue came from Neste, the company that Peter Vanacker headed before becoming the CEO of LyondellBasell.

Neste and Kinder Morgan have started up a storage and logistics hub in Harvey, Louisiana that will collect used cooking oil and other renewable feedstocks that Neste uses to produce renewable diesel, sustainable aviation fuel (SAF) and renewable naphtha at its plants in Martinez, California; Singapore; Rotterdam in the Netherlands; and Porvoo in Finland.

The companies said the hub in Louisiana can be expanded at Neste’s option.

Neste pioneered the production of naphtha from renewable feedstock, and the Houston refinery is a short distance by sea from the Harvey storage and logistics hub in Louisiana.

LyondellBasell could modify its refinery’s hydrocracker to handle renewable feedstock. If needs be, LyonellBasell could upgrade the feedstock at its refinery’s hydrotreaters.

In fact, the Houston refinery has a lot of hydroprocessing capacity, which would give it the ability to treat a lot of material, said Mike Connolly, ICIS principal analyst for refining.

The renewable naphtha produced in Houston can be shipped via existing pipelines to LyondellBasell’s nearby cracking operations in Channelview. Channelview is a natural destination for the refinery’s naphtha because the complex lacks a catalytic reformer.

The olefins produced from the renewable naphtha can be polymerised and marketed under LyondellBasell’s existing CirculenRenew brand.

LyondellBasell already processes renewable naphtha at its cracker in Wesselling, Germany. The feedstock comes from Neste under a long-term commercial agreement.

Meanwhile, the renewable diesel or sustainable aviation fuel (SAF) produced by the hydrocracker could be sold in the growing markets for these fuels.

For more than a year, LyondellBasell discussed building a chemical recycling plant at the refinery using its MoReTec process technology.

The existing hydrotreaters could upgrade the resulting pyoil produced by the MoReTec plant into a naphtha that LyondellBasell’s Channelview crackers could convert into olefins. LyondellBasell could market the polymers made from these olefins under its existing CirculenRevive brand.

If LyondellBasell pursues this project, it would be the company’s second commercial-scale MoReTec plant. It is considering building the first one in Wesseling. LyondellBasell should make a final investment decision on the Wesseling project by the end of 2023.

All of this hydrotreating and hydrocracking would require hydrogen.

Houston’s position as the nation’s refining and petrochemical hub already gives it access to plenty of hydrogen made by steam methane reforming.

However, LyondellBasell could choose to provide its Houston operations with blue or green hydrogen.

It, Air Liquide, Chevron and Uniper are part of a consortium that is evaluating sites for a hydrogen and ammonia project on the Gulf Coast. The Houston refinery is the top choice for the site.

More hydrogen could come from the proposed Houston HyVelocity Hub. It is among the hubs participating in the Department of Energy’s Regional Clean Hydrogen Hubs programme.

Blue and green hydrogen would further reduce the carbon footprint of the naphtha and fuels produced in Houston.

State and federal programmes could lower LyondellBasell’s development and production costs while offering it tax credits that could further enhance the profitability of the sustainability hub.

The US Inflation Reduction Act (IRA) introduced several tax credits and production credits for low-carbon hydrogen, low-carbon fuels and carbon-capture projects.

The IRA is recent regulation, so it remains to be seen whether its incentives and tax credits could be applied to renewable plastics and chemicals. The possibility does exist, since these renewable products sequester carbon dioxide.

The IRA is explicit about renewable fuels, so any renewable diesel, SAF or renewable gasoline produced at the sustainability hub would qualify for tax credits.

Moreover, the US states of California, Oregon and Washington have adopted Low Carbon Fuel Standards (LCFS), which would offer more incentives for any renewable fuels produced in Houston.

Texas is moving closer to reviving a tax-break programme that it offered to industrial projects. Hydrogen and renewable fuel projects could qualify under the proposed bill. If Texas revives the programme, LyondellBasell could apply for tax breaks, lowering the cost for the conversion project.

Insight article by Al Greenwood

Thumbnail shows bales of waste plastic, which could be recycled. Image by RICHARD VOGEL/AP/Shutterstock


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