Valero Energy Corporation · NYSE:VLO
Valero Energy — Corporate Update (February 2014)
33 slides from Valero Energy's corporate update, Feb 24, 2014
Slide 1: Basics of Refining and Processing Additional Light Sweet Crude Oil
Basics of Refining and Processing Additional Light Sweet Crude Oil February 25, 2014
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements 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 193
Slide 3: Lane Riggs, Senior Vice President Refining Operations
3 Lane Riggs Senior Vice President Refining Operations
Slide 4: Agenda
Agenda Crude oil overview Refining basics Refinery optimization Market fundamentals and impacts on refinery optimization Light crude oil processing 4
Slide 5: Crude Oil Characteristics
Crude Oil Characteristics Crude oils are blends of hydrocarbon molecules Classified and priced by density, sulfur content, and acidity Density is commonly measured in API gravity (relative density of crude oil to water) API > 10: lighter, floats on water API < 10: heavier, sinks in water Sulfur cont
Slide 6: Crude Oil Basics
6 Crude Oil Basics Majority of global crude oil reserves are sour Most quoted benchmark prices are light sweet crude oils WTI (West Texas Intermediate), Western Hemisphere Brent (North Sea), Atlantic Basin/Europe Tapis/Oman (Middle East), Asia Pacific Source: EIA Light/Medium Sour Heavy Sour Sweet S
Slide 7: What's in a Barrel of Crude Oil?
7 What's in a Barrel of Crude Oil? > 34 API Gravity < 0.7 % Sulfur 35% Demand Most Expensive 24 to 34 API Gravity > 0.7 % Sulfur 50% Demand Less Expensive < 24 API Gravity > 0.7 % Sulfur 15% Demand Least Expensive Refineries upgrade crude oil into higher value gasoline and distillates 2013 U.S. Refi
Slide 8: Basic Refining Concepts
8 Basic Refining Concepts Gasoline (high octane) Jet fuel Distillation Tower (Crude Unit) Refinery fuel gas Propane NGLs < 90°F Straight Run Gasoline (low octane) Gasoline (high octane) 90-220°F 220-315°F Kerosene Jet fuel Diesel Fuel oil 315-450°F Gasoline (high octane) Diesel Fuel oil 450-650°F 65
Slide 9: Hydroskimming/Topping Refinery
9 Hydroskimming/Topping Refinery Light Sweet Crude Heavy Fuel Oil & Other 32% Gasoline RBOB CBOB Conventional CARB Premium Propane/ Butane 4% 32% 32% Distillate Jet Fuel Diesel Heating Oil Distillation Tower Low Octane Gasoline and Naphtha LS Kerosene/Jet Fuel Low complexity refineries run sweet cru
Slide 10: Crude and Vacuum Towers
10 Crude and Vacuum Towers Crude Atmospheric Tower Vacuum Tower Heater
Slide 11: Medium Conversion: Catalytic Cracking
11 Medium Conversion: Catalytic Cracking Moderate complexity refineries tend to run more sour crudes, yield more high value products, and achieve higher volume gain Heavy Fuel Oil & Other 19% Distillation Tower Propane/ Butane 8% 30% Distillate Jet Fuel Diesel Heating Oil 43% Gasoline RBOB CBOB Conv
Slide 12: High Conversion: Coking/Resid Destruction
High Conversion: Coking/Resid Destruction 12 Heavy Fuel Oil & Other 14% Propane/ Butane 6% 33% Distillate Jet Fuel Diesel Heating Oil 47% Gasoline RBOB CBOB Conventional CARB Premium Medium/ Heavy Sour Crude Distillation Tower Low Octane Gasoline and Naphtha HS Kerosene/Jet Fuel HS Diesel/Heating Oi
Slide 13: Cokers
13 Cokers Delayed Coker Superstructure holds the drill and drill stem while the coke is forming in the drum Fluid Coker
Slide 14: Hydrocracking
14 Hydrocracking LEGEND HC : Hydrocarbon H2 : Hydrogen S : Sulfur Objective Upgrade high sulfur vacuum gasoil to low sulfur light products (diesel, jet, and gasoline) 20% to 30% volume expansion due to hydrogen saturation, i.e., gas to liquids Favorable economics, especially when cheap natural gas i
Slide 15: Hydrocracker
Hydrocracker Meraux hydrocracker expansion expected in early 2015 Should increase capacity by approximately 20 MBPD and increase distillate yield New reactor installed in October 2013 Reactor lift video 15 Reactors Hydrocracker Unit
Slide 16: Gary Simmons, Vice President Crude, Feedstock Supply & Trading
16 Gary Simmons Vice President Crude, Feedstock Supply & Trading
Slide 17: Maximizing Refinery Profit
Maximizing Refinery Profit Relationship between variables modeled in series of linear equations Linear program used to find combination of feed and product slates, operating rates and parameters that delivers highest profit 17 Prices Qualities Availabilities (purchase volumes) Prices Specifications
Slide 18: Growth in Light Sweet Crude Oil Production Is Changing How Refineries Are Optimized
Growth in Light Sweet Crude Oil Production Is Changing How Refineries Are Optimized Growing supply of domestic light sweet crude is outpacing demand closest to areas where the crude is produced New pipeline capacity and rail facilities are enabling the movement of inland crude to coastal refineries
Slide 19: Growth in Light Sweet Crude Oil Production Is Changing How Refineries Are Optimized
Growth in Light Sweet Crude Oil Production Is Changing How Refineries Are Optimized Refinery configuration plays a large part in determining the suitability of crudes and feedstocks Each refinery is designed to process a specific range of feedstocks Otherwise construction costs would be prohibitivel
Slide 20: Further Optimization Requires Capital Investment
Further Optimization Requires Capital Investment Capital investments are evaluated for further increases in light crude runs Dependent on medium and long range views for crude pricing Logistics projects require relatively short time frame to permit, engineer, and construct; generally have high retur
Slide 21: Examples of Constraints on Light Crude Runs
Examples of Constraints on Light Crude Runs Distillation tower unable to handle increased vapor traffic from light components Distillation column overhead hydraulic capacity limitations Furnace or heat exchanger design limits turndown flexibility or ability to cool and condense higher volume of ligh
Slide 22: Challenges with Processing Light Crudes
Challenges with Processing Light Crudes Light crudes contain significantly more naphtha and lighter components Bottleneck at top of crude distillation tower or in downstream naphtha and light ends processing units Disposition for incremental straight run gasoline and naphtha production needs to be a
Slide 23: Our North American Light Sweet Crude Runs Have More Than Tripled Since 2010
Our North American Light Sweet Crude Runs Have More Than Tripled Since 2010 Have More Than Tripled Since 2010 Have More Than Tripled Since 2010 23 Note: Meraux is included; Aruba, Delaware City, and Paulsboro are excluded.
Slide 24: Our View on U.S. Gulf Coast Medium and Heavy Oil Prices Versus Brent
Our View on U.S. Gulf Coast Medium and Heavy Oil Prices Versus Brent 24 24
Slide 25: Crude Oil Prices Versus Brent
Crude Oil Prices Versus Brent 25 $/bbl Source: Argus; February 2014 MTD average through 2/14. LLS prices are roll adjusted. (CHART)
Slide 26: Q&A
ww VALERO Q&A
Slide 27: Appendix
a VALERO Appendix
Slide 28: Major Refining Processes - Crude Processing
28 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
Slide 29: Major Refining Processes - Cracking
Major Refining Processes - Cracking Definition "Cracking" or breaking down large, heavy hydrocarbon molecules into smaller hydrocarbon molecules through application of heat (thermal) or the use of catalysts Process Coking - Thermal non-catalytic cracking process that converts low value oils to highe
Slide 30: Major Refining Processes - Combination
30 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 gaso
Slide 31: Major Refining Processes - Treating
31 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
Slide 32: List of Refining Acronyms
32 List of Refining Acronyms AGO - Atmospheric Gas Oil ATB - Atmospheric Tower Bottoms B-B - Butane-Butylene Fraction BBLS - Barrels BPD - Barrels Per Day BTX - Benzene, Toluene, Xylene CARB - California Air Resource Board CCR - Continuous Catalytic Regenerator DAO - De-Asphalted Oil DCS - Distribut
Slide 33: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: Ashley Smith, CFA, CPA Vice President, Investor Relations 210.345.2744 ashley.smith@valero.com Karen Ngo Manager, Investor Relations 210.345.4574 karen.ngo@valero.com John Locke Executive Director, Investor Relations - VLP 210-345-307