Total to replace oil refinery with clean fuel and plastic plants

Total SE will halt oil refining in the Paris region and spend more than 500 million euros ($582 million) by 2024 to replace its facility with plants making renewable fuels and plastics as the company sees rising demand for greener energies and products.

The French energy giant and European peers such as Royal Dutch Shell Plc and BP Plc have vowed to reduce their exposure to hydrocarbons and curb carbon emissions as governments, consumers and investors ramp up pressure on polluters to tackle global warming.

Crude oil refining in Grandpuits will stop at the end of the first quarter of next year and storage of hydrocarbons will end in late 2023, Total said in a statement Thursday. By 2024, the facility will focus on the production of renewable diesel mostly for the aviation industry, plastic recycling and bioplastics, and the operation of two solar-power plants, it said. Clients in the Paris region will instead be supplied by Total’s refineries in Normandy and Donges.

“Total is demonstrating its commitment to the energy transition and reaffirming its ambition to achieve carbon neutrality in Europe by 2050,” Bernard Pinatel, president of Total Refining & Chemicals, said in the statement.

Margin Call

Refining margins have been under pressure due to the coronavirus pandemic, which has cratered demand for petroleum products such as jet fuel. Conversely, Total’s biofuel plant in La Mede, in the south of France, has remained profitable during the crisis, Chief Executive Officer Patrick Pouyanne said in July.

Grandpuits has also been dogged in recent years by pipeline issues. Replacing the refinery would cost almost 600 million euros, an investment unlikely to be worthwhile as the government is pursuing policies to favor renewable fuels and cleaner vehicles, the company said.

The plant, to be commissioned in 2024, will be able to produce 400,000 tons of biofuels a year, including 170,000 tons of sustainable aviation fuel, in line with France’s target for 5% of jet fuel to be renewable by 2030. The rest of the output will be renewable naphtha, used to produce bioplastics, and renewable diesel.

The unit will process primarily animal fats from Europe and used cooking oil, supplemented with other vegetable oils like rapeseed. It won’t use palm oil, which is blamed by environmental groups for increasing deforestation.

Total’s joint venture with Dutch chemical maker Corbion NV will also build a new plant in Grandpuits, which will use sugar instead of oil to produce plastic from 2024, following a similar endeavor launched in Thailand two years ago. The market for so-called PLA bioplastics, which can be used to make plastic films and rigid packaging, is growing as much as 15% annually, according to Total.

On the same site, the French firm will team up with Plastic Energy to recycle plastic waste into polymers feedstock that can be used to make food packaging. Two solar plants, with a total capacity of 52 megawatts, will be built at the Grandpuits and Gargenville sites.