Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Day (January 2013)
35 slides from Valero Energy's investor day presentation, Jan 17, 2013
Slide 1: Refining 101
Refining 101 January 17, 2013
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 RiggsSenior Vice PresidentRefining Operations
Slide 4: Crude Oil Characteristics
4 Crude Oil Characteristics Crudes are classified and priced by density and sulfur contentCrude density is commonly measured by API gravityAPI gravity provides a relative measure of crude oil density The higher the API number, the lighter the crudeLight crudes are easier to process Heavy crudes are
Slide 5: Crude Oil Basics
(CHART) 5 Crude Oil Basics Majority of global crude oil reserves are sourMost quoted benchmark prices are light sweet crude oilsWTI (West Texas Intermediate), Western HemisphereBrent (North Sea Crude), EuropeTapis/Oman (Middle East), Asia Pacific High Acid(Sweet) Source: DOE, Oil & Gas Journal, Comp
Slide 6: What's in a Barrel of Crude Oil?
6 What's in a Barrel of Crude Oil? > 34 API Gravity < 0.7 % Sulfur35% DemandMost Expensive 24 to 34 API Gravity > 0.7 % Sulfur50% DemandLess Expensive < 24 API Gravity > 0.7 % Sulfur15% DemandLeast Expensive Refineries upgrade crude oil into higher value products 2011 U.S. Refinery Production 8% Pro
Slide 7: Basic Refining Concepts
7 Basic Refining Concepts Gasoline (high octane) Jet fuel Distillation Tower(CrudeUnit) Propane, Butane and lighter Refinery fuel gas Propane NGLs < 90°F Straight Run Gasoline (low octane) Gasoline (high octane) 90-220°F Naphtha 220-315°F Kerosene Kerosene Jet fuel Diesel Fuel oil 315-450°F Light Ga
Slide 8: Hydroskimming/Topping Refinery
8 Hydroskimming/Topping Refinery LightSweetCrude Heavy Fuel Oil & Other 32% GasolineRBOBCBOBConventionalCARBPremium Simple, low upgrading capability refineries run sweet crude Propane/Butane 4% 32% 32% DistillateJet FuelDieselHeating Oil Distillation Tower Low Octane Gasoline and Naphtha LS Kerosene
Slide 9: Crude and Vacuum Towers
9 Crude and Vacuum Towers Crude Atmospheric Tower Vacuum Tower Heater
Slide 10: Medium Conversion: Catalytic Cracking
10 Medium Conversion: Catalytic Cracking Moderate upgrading capability refineries tend to run more sour crudes while achieving increased higher value product yields and volume gain Heavy Fuel Oil & Other 19% Distillation Tower Propane/Butane 8% 30% DistillateJet FuelDieselHeating Oil 43% GasolineRBO
Slide 11: High Conversion: Coking/Resid Destruction
High Conversion: Coking/Resid Destruction 11 Complex refineries can run heavier and more sour crudes while achieving the highest light product yields and volume gain Heavy Fuel Oil & Other 14% Propane/Butane 6% 33% DistillateJet FuelDieselHeating Oil 47% GasolineRBOBCBOBConventionalCARBPremium Mediu
Slide 12: Cokers
12 Cokers Delayed Coker Superstructure holds the drill and drill stem while the coke is forming in the drum Fluid Coker
Slide 13: Gary Simmons, Vice President Crude, Feedstock Supply & Trading
13 Gary SimmonsVice PresidentCrude, Feedstock Supply & Trading
Slide 14: Hydrocracking Basics
14 Hydrocracking Basics LEGENDHC : HydrocarbonH2 : HydrogenS : Sulfur ObjectiveUpgrade high sulfur vacuum gasoil (VGO) to low sulfur light products (diesel, jet, and gasoline)20% to 30% volume expansion due to hydrogen saturation; gas to liquids!Favorable economics, especially when natural gas is re
Slide 15: Key Drivers for Valero's Hydrocrackers
12,000 BPD (20%) volume expansion Hydrocracker Unit Operating Costs Hydrocracker Unit Operating Costs Heat, power, labor, etc. $1.50 per barrel (per barrel amount based on hydrocracker unit volumes) (per barrel amount based on hydrocracker unit volumes) Synergies with Plant Synergies with Plant With
Slide 16: Port Arthur Hydrocracker
Port Arthur Hydrocracker 16 Hydrocracker Reactors Hydrocracker Unit
Slide 17: Refinery Optimization
Key Model Inputs Refinery Optimization Valero uses linear programming models (LP) to optimize its refineriesLPs are complex models that incorporate:Representations of each refinery unit's operationsEvery potential feedstock, intermediate, and productTakes into account varying properties and pricingL
Slide 18: Typical Refining Unit Volume Gain/Loss
Typical Refining Unit Volume Gain/Loss 18 Refining Unit Volume Gain/Loss on feedstock to unit Reformer running at High severity - 30% to - 20% Low severity - 20% to - 10% FCC + 5% to + 15% Alkylation - 20% to - 25% Coker - 25% to - 35% Full-conversion Hydrocracker + 20% (targeting heavier diesel pro
Slide 19: Gulf Coast Refineries and Growing Availability of Domestic Light Sweet Crude Oil
Gulf Coast Refineries and Growing Availability of Domestic Light Sweet Crude Oil Growing supply of domestic light sweet crude is expected to provide a structural discount for Gulf Coast light sweet crudesHow do you deal with growing supply of cheaper light sweet volumes?Back out imports from existin
Slide 20: Issues with Processing Light Crudes
Issues with Processing Light Crudes 20 Refineries are designed for a specific range of crude oil properties Otherwise construction costs would be prohibitively highLighter crudes contain significantly more light components, e.g., propane, butane, straight run gasoline, naphtha Gasoline (high octane)
Slide 21: Key Constraints
Key Constraints 21 Many factors can constrain the ability to process light componentsConstraints are very specific to each refinery and individual crude unit within a refineryThey may occur in the crude unit itself, or in the downstream processing of lighter components into finished productsExamples
Slide 22: Valero's Ability to Run Discounted Light Crude
Valero has increased the amount of domestic light crudes processed as additional volumes have become availableValero has ceased all imports of foreign light crudes for its Gulf Coast and Memphis refineriesValero is evaluating potential projects to further increase its domestic light crude processing
Slide 23: Ashley Smith, Vice President Investor Relations
23 Ashley SmithVice PresidentInvestor Relations
Slide 24: Successfully Completed Port Arthur Hydrocracker
57,000 BPD Port Arthur hydrocracker complete and operating above expectationsHigher diesel quality with cetane numbers in the low 60s versus expected low 50sExceeds European specifications by over 10 cetane numbersProvides blending opportunity to upgrade margin on lower-quality distillate production
Slide 25: Valero's Hydrocracker Projects Show Profits Under Various Price Sets
Valero's Hydrocracker Projects Show Profits Under Various Price Sets Under Various Price Sets Under Various Price Sets 25 Note: EBITDA = Pretax operating income + depreciation and amortization, excludes interest expense; see details in appendix millions
Slide 26: Q&A
Wy fr VALERO Q&A
Slide 27: Appendix
Wy i VALERO Appendix
Slide 28: Major Refining Processes - Crude Processing
28 Major Refining Processes - Crude Processing DefinitionSeparating crude oil into different hydrocarbon groups The most common means is through distillationProcessDesalting - Prior to distillation, crude oil is often desalted to remove corrosive salts as well as metals and other suspended solids.At
Slide 29: Major Refining Processes - Cracking
29 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 catalystsProcessCoking - Thermal non-catalytic cracking process that converts low value oils to
Slide 30: Major Refining Processes - Combination
30 Major Refining Processes - Combination DefinitionLinking 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 moleculeProcessAlkylation - Important process to upgrade light olefins to high-value gasolin
Slide 31: Major Refining Processes - Treating
31 Major Refining Processes - Treating DefinitionProcessing of petroleum products to remove some of the sulfur, nitrogen, heavy metals, and other impuritiesProcessCatalytic Hydrotreating, Hydroprocessing, sulfur/metals removal - Used to remove impurities (e.g. sulfur, nitrogen, oxygen and halides) f
Slide 32: List of Refining Acronyms
32 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 Contro
Slide 33: Project Price Set Assumptions
Project Price Set Assumptions 33 Commodity Base Case ($/barrel) 2008 ($/barrel) 2009 ($/barrel) 2010 ($/barrel) 2011 ($/barrel) 2012 ($/barrel) LLS Crude oil1 85.00 102.07 62.75 81.64 111.09 112.20 LLS - USGC HS Gas Oil -3.45 2.03 -2.86 -2.72 -5.75 -7.59 USGC Gas Crack 6.00 2.47 6.91 5.32 5.11 4.66
Slide 34: Project Price Sensitivities
Project Price Sensitivities 34 EBITDA1 Sensitivities (Delta $ millions/year) Port Arthur HCU St. Charles HCU Crude oil, + $1/BBL 4 3.6 Crude oil - USGC HS Gas Oil, + $1/BBL 16.7 17.8 USGC Gas Crack, + $1/BBL 12.9 13.3 USGC ULSD Crack, + $1/BBL 18.4 20.8 Natural Gas, - $1/MMBTU 18.3 19.7 Total Invest
Slide 35: Investor Relations Contacts
Investor Relations Contacts For more information, please contact:Ashley Smith, CFA, CPAVice President, Investor Relations210.345.2744ashley.smith@valero.comMatthew JacksonInvestor Relations Specialist210.345.2564matthew.jackson@valero.com 35