valero energy st. charles refinery tour – april 6, 2008
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St. Charles Refinery TourSt. Charles Refinery TourApril 6, 2008April 6, 2008
Management Presentation
1
Basics of RefiningSt. Charles Refinery OperationsQ&APlant TourConcluding Remarks
Agenda
2
Gary SimmonsVice President
Planning and Economics
3
Crude Oil Characteristics
Crude oils are classified and priced by density and sulfur contentCrude oil density is commonly measured by API gravity• API gravity provides a relative measure of crude oil density • The higher the API number, the lighter the crude oil
Light crude oils are easier to process Heavy crude oils are more difficult to process
Sulfur content is measured as a percentage• Less than 0.7% sulfur content = sweet• Greater than 0.7% sulfur content = sour• High sulfur crude oils require additional processing to meet regulatory
specs
Acid content is measured by Total Acid Number (TAN)• Acidic crude oils are highly corrosive to refinery equipment• High acid crude oils are those with TAN greater than 0.7
4
Arab Heavy
Arab Medium
Arab Light
Alaskan North Slope
Iran Heavy
DubaiMars
TapisWTIBrent
Bonny LightCabinda
Napo
Cold Lake
WCSMaya
Ameriven-Hamaca
M-100 (resid)
1980
19902000
2010Urals
Cerro Negro
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
15 20 25 30 35 40 45 50
Crude Oil Basics
Majority of global crude oil reserves are light/medium sourMost quoted benchmark prices are light sweet crude oils
• WTI (West Texas Intermediate), Western Hemisphere• Brent (North Sea Crude), Europe
Historical trend shows global crude oil supply becoming heavier and more sour
Estimated Quality of Reserves (2007)
14%
19%
66%
1%
High Acid(Sweet)
Source: DOE, Oil & Gas Journal, Company Information
Light/MediumSour
HeavySour
Sweet
SWEE
T
SU
LFU
R C
ON
TEN
T
S
OU
R
HEAVY API GRAVITY LIGHT
Crude Oil Quality by Types
Source: Industry reportsNOTE: Red line represents the average crude oil quality by decade (actual and projected)
5
What’s in a Barrel of Crude Oil?
48%
26%
24%
2%
63%
21%
15%1%
35%
30%
32%
3%> 34 API Gravity
< 0.7 % Sulfur
35% Demand
Most Expensive
24 – 34 API Gravity
> 0.7 % Sulfur
50% Demand
Less Expensive
< 24 API Gravity
> 0.7 % Sulfur
15% Demand
Least Expensive
Refineries upgrade crude oil to higher value products
2006 U.S. Production
8% Propane/Butane
49%
GasolineRFGConventionalCARBPremium
33% DistillateJet FuelDieselHeating Oil
Heavy Fuel Oil & Other
10%
Source: EIA Refiner Production
Refinery Gases8%
Light Sweet(e.g. WTI, LLS, Brent)
Medium Sour(e.g. Mars, Arab Light,Arab Medium, Urals)
Heavy Sour(e.g. Maya, Cerro Negro, Cold
Lake, Western Canadian Select)
Crude Oil Types Characteristics Yields
6
Basic Refining Concepts
DistillationTower
(CrudeUnit)
Propane, Butane and lighter
• Refinery fuel gas • Propane• NGLs
< 90°F
Light Straight Run Gasoline (low octane)
• Gasoline (high octane)90–220°F
Naphtha • Gasoline (high octane)• Jet fuel
220–315°F
Kerosene• Kerosene • Jet fuel• Diesel • Fuel oil
315–450°F
Light Gas Oil• Gasoline (high octane)• Diesel• Fuel oil
450–650°F
Heavy Gas Oil650–800°F
Resid, Pitch800+°F
Furnace
VacuumUnit
More
• Gasoline (high octane)• Diesel• Fuel oil
• Gasoline (high octane)• Diesel• Heavy Fuel Oil, Asphalt• Lube stocks
Intermediates Final Products
processing
More
processing
More
processing
More
processing
More
processing
More
processing
Crude oil
7
Hydroskimming/Topping Refinery
LightSweetCrude
Oil
100% Total Yield
Heavy Fuel Oil & Other
30%GasolineRFGConventionalCARBPremium
Propane/Butane
Hydrogen
Crude Unit
Vacuum Unit
Reformer
Propane/Butane
High Octane Gasoline
Heavy Fuel Oil / Resid
LS Diesel/Heating Oil
Distillate Desulfurizer
HS Diesel/Heating Oil
HS Kerosene/Jet Fuel
Gas Oil
4%
32%
34%DistillateDieselHeating OilJet Fuel
Dis
tilla
tion
Tow
er
Low Octane Gasoline and Naphtha
LS Kerosene/Jet Fuel
Simple, low upgrading capability refineries run light sweet crude oil, yet produce a high yield of heavy fuel oil and resid
8
Medium Conversion: Catalytic Cracking
Refineries with moderate upgrading capabilities tend to run more sour crude oils while increasing yields of higher value product and experiencing volume gain
Hydrogen
Light Cycle Oil (LCO)
Crude Unit
Vacuum Unit
Reformer
Alkylation Unit
Propane/Butane
High Octane Gasoline
Heavy Fuel Oil / Resid
FCC Gasoline
Alkylate
Distillate Desulfurizer
HS Diesel/Heating Oil
HS Kerosene/Jet Fuel
Gas OilFluid Catalytic Cracker (FCC)
104% Total Yield
Heavy Fuel Oil & Other24%
Dis
tilla
tion
Tow
er
Propane/Butane8%
27%DistillateDieselHeating OilJet Fuel
45%GasolineRFGConventionalCARBPremium
LightSour
Crude
Low Octane Gasoline and Naphtha
LS Kerosene/Jet Fuel
LS Diesel/Heating Oil
9
High Conversion: Coking/Resid Destruction
Complex refineries can run heavier and more sour crude oils while achieving the highest yields of light products and greatest volume gain
108% Total Yield
Heavy Fuel Oil & Other
15%
Propane/Butane
7%
28%DistillateJet FuelDieselHeating Oil
58%GasolineRFGConventionalCARBPremium
Hydrogen
LCO
Reformer
Medium Gas Oil
Propane/Butane
High Octane
Heavy Fuel Oil
FCC Gasoline
Kerosene
Alky Gasoline
Hydrogen Plant
Coke
Gas
Diesel
Kerosene/Jet Fuel
Diesel/Heating Oil
Low Octane Gasoline
DelayedCoker
Fluid Catalytic Cracker (FCC)
Alkylation Unit
DistillateDesulfurizer
Crude Unit
Vacuum Unit
Light Gas Oil Hydrocrackate Gasoline
Ultra Low Sulfur Jet/Diesel
Hydrocracker
Medium/Heavy Sour
CrudeOil
Dis
tilla
tion
Tow
er
10
Conversion Economics
Need conversion capacity to capitalize on sour crude oil differentials• Hydroskim – Breakeven or moderate margins; High resid yield
When margins are positive – increase crude oil runsWhen margins are negative – decrease crude oil runs
• Cracking – Better margins; Lower resid yield• Coking – Best margins; Lowest resid yield
Maximize heavy crude oils
U.S. Gulf Coast Refinery Margins
(10)
(5)
0
5
10
15
20
25
30
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
US$
/Bbl
Arab Medium Hydroskimming LLS Cracking Maya Coking
11
Comparison of Conversion Capacity
Valero is an industry leader in upgrading capacityValero’s upgrading capacity provides superior operational flexibilitySignificant capital investment and long lead time required to add conversion capacity
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
VLO XOM COP BP CVX RDS MRO TSO SUN
Cat Cracking
Hydrocracking
Coking
U.S. Conversion Capacity1MBPD
Source: Oil & Gas Journal, Company Websites 1 Conversion Capacity = Sum of Coking, Hydrocracking and Cat Cracking Capacity
12
Ralph PhillipVice President and General Manager
St. Charles Refinery
13
Valero St. Charles Refinery
Commissioned in the 1930’s
Acquired by Valero on July 1, 2003. Over $3 billion in upgrades over the past 10 years, $1 billion since Valero acquisition
Located on 1,000 acres adjacent to the Mississippi River with strategic feedstock and product transportation corridors
Owns and operates five docks on the Mississippi River
Connected to the LOOP Crude delivery system and the Colonial products pipeline system
Heavy Sour Crude Facility with nearly 80% of the finished products shipped as Gasoline, ULSD, and other light products
Throughput capacity of 250 MBPD total feedstocks
14
Valero St. Charles Refinery
Staffed with nearly 600 full-time employees and 200 continuing service contractors
Recognized as an “OSHA Voluntary Protection Program Star Site”
Received OSHA VPP “Star Among Stars” Status in 2006-2007
Received Valero Chairman’s Safety Award in 2005 and 2007
Received Valero Chairman’s Environmental Award in 2004
15
St. Charles Products andFeedstock Slate
24.5Mixed LPG
37Slurry (Fuel Oil)
100235Total Liquid Products
<1450Sulfur (Tons/day)
<13,900Pet Coke (Tons/day)
49Propylene
3172Ultra Low Sulfur Diesel
00.3Propane
7
17
36
%
17Alkylate
40High Sulfur VGO
85Gasoline
MBPDProduct
250.85 / 18.5Total LCO
28652.4 / 14.5M-100
13Total Butylene
130.03 / 60Total Naphtha
2660Total Cat Feed
37853.6 / 20.3Maya
100231Total
6150.5 / 22.5LSATB
19450.4 / 24.5LSVGO
1.9 / 30.3
S % / API
70
4
%
160Total Crude
10Mars
MBPDCrude
Typical Product Slate Typical Feedstock Slate
16
Over $1,000 MM invested in capital improvements and $130 MM for turnaround maintenance at St. Charles since Valero’s acquisition. Another $3,000 MM is approved for completion prior to the end of 2010.
• Crude/Vacuum/Coker – 40 MBPD crude capacity increaseCompleted in 2004
• Gasoline Desulfurization Unit 60 MBPD CapacityStarted up in 2005
• Utility Systems UpgradesNew 650# Boiler in 2005Refinery water system in 2007
• HT/HC Combination Unit 58 MBPD CapacityStarted up in 2007
• SMR Hydrogen Units 100 MMSCFD CapacityStarted up in 2007
• Facilities UpgradesNew Laboratory in 2005New East plant control room in 2007New Maintenance facility in 2008
St. Charles’ Capital Investments
17
St. Charles’ Capital Investments
$1.4 Billion Refinery Upgrade and ExpansionNew 50,000 BPD Gas Oil Hydrocracker45,000 BPD Crude Expansion to 235,000 BPD10,000 BPD Coker Expansion to 80,000 BPDIncreases ULSD production by 49,000 BPD Target 2Q 2010 Completion
$2 Billion CCR/Aromatics ComplexNew 75,000 BPD Continuous Catalytic ReformerUpgrades Naphtha from Valero HydrocrackersProduces 33,000 BPD Para-xyleneProduces 17,000 BPD BenzeneTarget 1Q 2011 Completion
Positions refinery for long term competitiveness
18
Appendix
19
St. Charles Refinery Flow Diagram
20
Optimizing Refining Portfolio
Valero Marketing Presence
Quebec, Canada• 215,000 bpd capacity• 7.8 Nelson complexity
Three Rivers, Texas• 100,000 bpd capacity• 12.4 Nelson complexity
Corpus Christi, Texas• 315,000 bpd capacity• 18.4 Nelson complexity
Wilmington, California• 135,000 bpd capacity• 15.9 Nelson complexity
Benicia, California• 170,000 bpd capacity• 15.0 Nelson complexity
McKee, Texas• 170,000 bpd capacity• 9.4 Nelson complexity
Krotz Springs, Louisiana• 85,000 bpd capacity• 6.5 Nelson complexity• Under Strategic Evaluation
Texas City, Texas• 245,000 bpd capacity• 10.8 Nelson complexity
Houston, Texas• 145,000 bpd capacity• 15.1 Nelson complexity
Port Arthur, Texas• 310,000 bpd capacity• 11.8 Nelson complexity
St. Charles, Louisiana• 250,000 bpd capacity• 14.3 Nelson complexity
Ardmore, Oklahoma• 90,000 bpd capacity• 10.9 Nelson complexity
Memphis, Tennessee• 195,000 bpd capacity• 7.5 Nelson complexity• Under Strategic Evaluation
Paulsboro, New Jersey• 195,000 bpd capacity• 9.1 Nelson complexity
San Nicholas, Aruba• 275,000 bpd capacity• 7.0 Nelson complexity• Under Strategic Evaluation
Delaware City, Delaware• 210,000 bpd capacity• 13.2 Nelson complexity
Capacity shown in terms of crude and feedstock throughputSource: Nelson complexities, Oil & Gas Journal and Valero estimates
Lima, Ohio• 165,000 bpd capacity• SOLD in 2007
Non-Core Refinery Under Strategic Evaluation
Core Refinery
Legend
21
Major Refining Processes – Crude Processing
Definition• Separating crude oil into different hydrocarbon groups • The most common means is through distillation
Process• Desalting – Prior to distillation, crude oil is often desalted to remove
corrosive salts as well as metals and other suspended solids.• Atmospheric Distillation – Used to separate the desalted crude oil into
specific hydrocarbon groups (straight run gasoline, naphtha, light gas oil, etc.) or fractions.
• Vacuum Distillation – Heavy crude residue (“bottoms”) from the atmospheric column is further separated using a lower–pressure distillation process. Means to lower the boiling points of the fractions and permit separation at lower temperatures, without decomposition and excessive coke formation.
22
Major Refining Processes – Cracking
Definition• “Cracking” or breaking down large, heavy hydrocarbon molecules into
smaller hydrocarbon molecules thru application of heat (thermal) or through the use of catalysts
Process• Coking – Thermal non–catalytic cracking process that converts low value
oils to higher value gasoline, gas oils and marketable coke. Residual fuel oil from vacuum distillation column is typical feedstock.
• Visbreaking – Thermal non–catalytic process used to convert large hydrocarbon molecules in heavy feedstocks to lighter products such as fuel gas, gasoline, naphtha and gas oil. Produces sufficient middle distillates to reduce the viscosity of the heavy feed.
• Catalytic Cracking – A central process in refining where heavy gas oil range feeds are subjected to heat in the presence of catalyst and large molecules crack into smaller molecules in the gasoline and surrounding ranges.
• Catalytic Hydrocracking – Like cracking, used to produce blending stocks for gasoline and other fuels from heavy feedstocks. Introduction of hydrogen in addition to a catalyst allows the cracking reaction to proceed at lower temperatures than in catalytic cracking, although pressures are much higher.
23
Major Refining Processes – Combination
Definition• Linking two or more hydrocarbon molecules together to form a large
molecule (e.g. converting gases to liquids) or rearranging to improve the quality of the molecule
Process• Alkylation – Important process to upgrade light olefins to high–value
gasoline components. Used to combine small molecules into largemolecules to produce a higher octane product for blending with gasoline.
• Catalytic Reforming – The process whereby naphthas are changed chemically to increase their octane numbers. Octane numbers aremeasures of whether a gasoline will knock in an engine. The higher the octane number, the more resistance to pre or self–ignition.
• Polymerization – Process that combines smaller molecules to produce high octane blending stock.
• Isomerization – Process used to produce compounds with high octane for blending into the gasoline pool. Also used to produce isobutene, an important feedstock for alkylation.
24
Major Refining Processes – Treating
Definition• Processing of petroleum products to remove some of the sulfur,
nitrogen, heavy metals, and other impurities
Process• Catalytic Hydrotreating, Hydroprocessing, sulfur/metals removal –
Used to remove impurities (e.g. sulfur, nitrogen, oxygen and halides) from petroleum fractions. Hydrotreating further “upgrades” heavy feeds by converting olefins and diolefins to parafins, which reduces gum formation in fuels. Hydroprocessing also cracks heavier products to lighter, more saleable products.
• Deasphalting – A process in which the asphaltic constituents of a heavy residual oil are separated by mixing with a liquid solvent. Everything will dissolve in the solvent but the asphaltics, which are subsequently removed.
25
List of Refining Acronyms
AGO – Atmospheric Gas OilATB – Atmospheric Tower BottomsB–B – Butane–Butylene FractionBBLS – BarrelsBPD – Barrels Per DayBTX – Benzene, Toluene, XyleneCARB – California Air Resource BoardCCR – Continuous Catalytic RegeneratorDAO – De–Asphalted OilDCS – Distributed Control SystemsDHT – Diesel HydrotreaterDSU – Desulfurization Unit EPA – Environmental Protection AgencyESP – Electrostatic PrecipitatorFCC – Fluid Catalytic CrackerGDU – Gasoline Desulfurization UnitGHT – Gasoline HydrotreaterGOHT – Gas Oil HydrotreaterGPM – Gallon Per MinuteHAGO – Heavy Atmospheric Gas OilHCU – Hydrocracker UnitHDS – HydrodesulfurizationHDT – HydrotreatingHGO – Heavy Gas OilHOC – Heavy Oil Cracker (FCC)H2 – HydrogenH2S – Hydrogen SulfideHF – Hydroflouric (adic)HVGO – Heavy Vacuum Gas OilkV – Kilovolt
kVA – Kilovolt AmpLCO – Light Cycle OilLGO – Light Gas OilLPG – Liquefied Petroleum GasLSD – Low Sulfur DieselLSR – Light Straight Run (Gasoline)MON – Motor Octane NumberMTBE – Methyl Tertiary–Butyl EtherMW – MegawattNGL – Natural Gas LiquidsNOX – Nitrogen OxidesP–P – Propane–PropylenePSI – Pounds per Square InchRBOB – Reformulated Blendstock for Oxygen Blending RDS – Resid DesulfurizationRFG – Reformulated GasolineRON – Research Octane NumberRVP – Reid Vapor PressureSMR – Steam Methane Reformer (Hydrogen Plant)SOX – Sulfur OxidesSRU – Sulfur Recovery UnitTAME – Tertiary Amyl Methyl EtherTAN – Total Acid NumberULSD – Ultra–low Sulfur DieselVGO – Vacuum Gas OilVOC – Volatile Organic CompoundVPP – Voluntary Protection ProgramVTB – Vacuum Tower BottomsWTI – West Texas IntermediateWWTP – Waste Water Treatment Plant
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Safe Harbor StatementStatements contained in this presentation that state the Company's or management's expectations or predictions of the future are forward–looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words "believe," "expect," "should," "estimates," and other similar expressions identify forward–looking statements. It is important to note that actual results could differ materially from those projected in such forward–looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission, and available on Valero’s website at www.valero.com.