valero energy Basics of Refining Presentation - January 13, 2009

Refining 101 + Technical Teach-in on the Teach- Hydrotreater & Hydrocracker January 13, 2009

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 E h th S iti Exchange A t of 1934 Th words quot;believe,quot; Act f 1934. The d quot;b li quot; quot;expect,quot; quot;should,quot; quot;estimates,quot; and other similar expressions identify forward–looking statements. It is important to note that actual results could differ materially from those projected i tl lt ld diff t i ll f th j t d 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. 2

Rich Marcogliese g Executive Vice President and Chief Operating Officer 3

Crude Oil Characteristics Crudes are classified and priced by density and sulfur content Crude 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 Light crudes are easier to process Heavy crudes are more difficult to process Crude sulfur content is measured as a percentage • Less than 0.7% sulfur content = sweet • Greater than 0.7% sulfur content = sour • High sulfur crudes require additional processing to meet regulatory specs Acid content is measured by Total Acid Number (TAN) • Acidic crudes highly corrosive to refinery equipment • Hi h acid crudes are those with TAN greater than 0 7 High id d h ih h 0.7 4

Crude Oil Basics Crude Oil Quality by Types 4.0% Estimated Quality of Reserves (2007) Cold Lake SOUR Cerro Negro 3.5% Maya WCS 3.0% M-100 (resid) Arab Heavy Sweet SULFU CONTENT High Acid 2.5% Arab Medium 19% (Sweet) Light/Medium Dubai Napo 1% UR 2.0% 2 0% Mars Sour Arab Light Iran Heavy Ameriven- 1.5% 14% Hamaca 66% Urals Heavy Alaskan North Sour 1.0% Slope EET SWE 0.5% WTI Brent Tapis Bonny Light Cabinda 0.0% 15 20 25 30 35 40 45 50 Source: DOE, Oil & Gas Journal, Company Information HEAVY API GRAVITY LIGHT Source: Industry reports Majority of global crude oil reserves are sour Most quoted benchmark prices are light sweet crude oils • WTI (West Texas Intermediate), Western Hemisphere (W t T It di t ) W t H ih • Brent (North Sea Crude), Europe 5

What’s in a Barrel of Crude Oil? Crude Oil Types Inherent Yields Characteristics 2007 U.S. Refinery 3% Production > 34 API Gravity 32% Light Sweet < 0.7 % Sulfur Propane/ (e.g. WTI, LLS, Brent) Refinery 8% 30% Butane 8% 35% Demand Gases 35% Most Expensive Gasoline RFG 48% Conventional 2% CARB 24 to 34 API Gravity Premium 24% Medium Sour > 0.7 % Sulfur 26% (g (e.g. Mars, Arab Light, , g, 50% Demand Arab Medium, Urals) Distillate 35% 48% Less Expensive Jet Fuel Diesel Heating Oil 1% < 24 API Gravity 15% Heavy > 0.7 % Sulfur 9% Fuel Oil & 21% Heavy Sour Other 15% Demand (e.g. Maya, Cerro Negro, Cold 63% Lake, Western Canadian Select) Source: EIA Refiner Production Least Expensive Refineries upgrade crude oil to higher value products 6

Basic Refining Concepts Intermediates Final Products < 90°F Propane, Butane • Refinery fuel gas and lighter • Propane C1 to C4 • NGLs Straight Run 90–220°F More • Gasoline (high octane) Gasoline (low C5 to C8 processing octane) Crude oil More 220–315°F • Gasoline (high octane) Naphtha • Jet fuel Distillation C8 to C12 processing Tower • Kerosene (Crude More 315–450°F • Jet fuel Unit) Kerosene • Diesel C12 to C30 processing • Fuel oil • Gasoline (high octane) More 450–650°F Light Gas Oil • Diesel Furnace processing i C30 to C50+ • Fuel oil • Gasoline (high octane) More 650–800°F Heavy Gas Oil • Diesel Vacuum processing • Fuel oil C 30 to C50+ Unit • Gasoline (high octane) Residual Fuel More 800+°F • Diesel Oil/Asphalt • Fuel oil processing C50 to C100+ • Lube stocks 7

Hydroskimming/Topping Refinery Crude Unit Propane/ 4% Propane/Butane Butane Gasoline Reformer High Octane Gasoline Low Octane Gasoline RFG 32% Distillation Tower and Naphtha Conventional CARB Hydrogen Premium Light n Distillate HS Kerosene/Jet Fuel Sweet LS Kerosene/Jet Fuel Distillate 32% Desulfurizer Jet Fuel Crude Diesel LS Diesel/Heating Oil HS Diesel/Heating Oil Heating Oil g Heavy Vacuum Gas Oil Fuel Oil & 32% Unit Other Heavy Fuel Oil 100% Total Yield Simple, low upgrading capability refineries run sweet crude 8

Crude and Vacuum Towers Reactor Heater Crude Atmospheric Tower Vacuum Tower Reformer 9

Medium Conversion: Catalytic Cracking Crude Propane/ Unit 8% Butane Propane/Butane Gasoline G li RFG Reformer Low Octane Gasoline High Octane Gasoline 45% Conventional and Naphtha Distillation Tower CARB Premium Hydrogen Distillate Light n LS Kerosene/Jet Fuel HS Kerosene/Jet Fuel F el Desulfurizer Distillate 31% Sour Jet Fuel HS Diesel/Heating Oil LS Diesel/Heating Oil Diesel Crude Heating Oil Light Cycle Oil (LCO) Alkylation Alkylate Unit Fluid Catalytic Gas G Oil Vacuu Cracker (FCC) m Unit FCC Gasoline Heavy Fuel Oil & 20% Other Heavy Fuel Oil 104% Total Yield Moderate upgrading capability refineries tend to run more sour crudes while achieving increased higher value product yields and volume gain 10

High Conversion: Coking/Resid Destruction Hydrogen Plant Crude Gas Unit Propane/ 7% Butane Propane/Butane Gasoline RFG Distillatio Tower 50% Reformer High Octane Gasoline Conventional Low Octane Gasoline CARB and Naphtha Medium/ Premium on Hydrogen Heavy Distillate 36% Distillate HS Kerosene/Jet Fuel LS Kerosene/Jet Fuel Sour Desulfurizer Jet Fuel Diesel Crude Heating Oil LS Diesel/Heating Oil HS Diesel/Heating Oil Hydrocracker Hydrocrackate Gasoline Light Gas Oil Ultra Low Sulfur Jet/Diesel LCO Alkylation Alky Gasoline Unit U it Fluid Catalytic Cracker (FCC) Medium Gas Oil Vacuum FCC Gasoline Unit Heavy Fuel Oil & 15% Other Delayed Heavy Fuel Oil Coke Coker 108% Total Yield Complex refineries can run heavier and more sour crudes while achieving the highest light product yields and volume gain 11

FCC and Hydrocracker Reactors Fluidized Catalytic Cracker Reactor Hydrocracker Reactors Main Column Regenerator 12

Cokers Delayed Coker Superstructure holds the drill and drill stem Fluid Coker while the coke is forming in the drum g 13

Conversion Economics 6-3-2-1 Crack Spread $/Bbl 45 40 35 30 25 20 15 10 5 0 -5 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 LLS (Light Sweet) Mars (Medium Sour) Maya (Heavy Sour) Need conversion capacity to capitalize on sour crude oil differentials • Hydroskimming – Breakeven or moderate margins; High resid yield When margins are positive – increase crude oil runs When margins are negative – decrease crude oil runs • Cracking – Better margins; Lower resid yield • Coking – Best margins; Lowest resid yield Maximize heavy crude oils 14

Desulfurization Basics Objective Remove sulfur from light products (gasoline or diesel) to meet air quality requirements f clean b i f l i t for l burning fuels Units are called desulfurization or hydrotreater Desulfurization Unit D lf i ti U it Desulfurized Light Products HC H2 High Sulfur HC-S HC-S HC-S Light H2 Elemental H2 Products Catalyst Ctl t Sulfur Plant Sulfur (HC-S) • Agricultural HC-S HC-S H2S S S S • Pharmaceutical H2 S HC-S S S Hydrogen Unit LEGEND H2 H2 H2 HC : Hydrocarbon y H2 1000 or less PSI; H2 : Hydrogen H2 H2 700 F or less S : Sulfur 15

Hydrocracking Basics Objective Value added upgrading of high sulfur distillates to low sulfur gasoline and ultra low sulfur jet/diesel to meet air quality requirements for clean burning f l l lf j t/di lt ti lit i tf l b i fuels Typically achieve 20% to 25% volume expansion due to hydrogen saturation Hydrocracking Unit Hd ki U it Desulfurized Hydrocrackate Gasoline HC H2 High Sulfur HC-S HC-S HC-S H2 Distillate H2 Desulfurized Ultra Low Sulfur Jet/Diesel HC H2 H2 (HC-S) (HC S) Catalysts H2 Ctl t Elemental El tl H2 Sulfur Plant Sulfur HC-S H2 H2 HC-S • Agricultural H2S H2 S S S • Pharmaceutical HC-S S S S Hydrogen Unit LEGEND H2 H2 H2 HC : Hydrocarbon 1300+ PSI; H2 H2 : Hydrogen H2 H2 725 to 780 F S : Sulfur 16

Hydrocrackers Corpus Christi Hydrocracker McKee Hydrocracker

Distillate Yield Maximization Recent economics have incentivized maximization of distillate rather than gasoline Typical opportunities to increase distillate yields • Immediate, non-capital opportunities +2 to 4% Examples: O ti i ti of distillation cut points, E l Optimization f di till ti t it re-routing of intermediate streams, and tank optimization • Non-capital taking < 1yr +1 to 2% Examples: FCC catalyst change, HCU catalyst selection CC C • Capital projects taking < 1 yr +1 to 2% Examples: Minor hardware changes (tower internals, reactor distributors, ect.), h d li d b ttl t di t ib t t ) hydraulic debottlenecking ki • Capital projects taking > 1 year +3 to 5% Examples: Install/expand distillate draw capacity on fractionators additional fractionation new HCU fractionators, fractionation, Total +7 to 13% 18

Q&A 19

Appendix 20

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 into specific hydrocarbon groups (straight run gasoline, naphtha, light gas oil, etc.) or fractions. •VVacuum Distillation – H Di ill i Heavy crude residue (“b d id (“bottoms”) f”) from the h 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. 21

Major Refining Processes – Cracking Definition • “Cracking” or breaking down large heavy hydrocarbon molecules into Cracking large, 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 g yp gy 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 l bj t d t h t i th f t l t d large molecules crack i t smaller l l k into ll 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. 22

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 large molecules 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 are measures of whether a gasoline will knock in an engine. The higher the octane number, the more resistance to pre or self–ignition. •Pl Polymerization – P i ti Process th t combines smaller molecules t produce hi h that bi ll l l to d high octane blending stock. • Isomerization – Process used to produce compounds with high octane for blending into the g g gasoline p pool. Also used to p produce isobutene, an important feedstock for alkylation. 23

Major Refining Processes – Treating Definition • Processing of petroleum products to remove some of the sulfur, nitrogen, nitrogen heavy metals and other impurities metals, Process • Catalytic Hydrotreating, Hydroprocessing, sulfur/metals removal – Used to remove impurities ( g sulfur, nitrogen, oxygen and halides) p (e.g. g yg ) 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 p g , products. 24

List of Refining Acronyms AGO – Atmospheric Gas Oil kVA – Kilovolt Amp ATB – Atmospheric Tower Bottoms LCO – Light Cycle Oil B–B – Butane–Butylene Fraction LGO – Light Gas Oil BBLS – Barrels LPG – Liquefied Petroleum Gas BPD – Barrels Per Day LSD – Low Sulfur Diesel BTX – Benzene, Toluene, Xylene LSR – Light Straight Run (Gasoline) CARB – California Air Resource Board MON – Motor Octane Number CCR – Continuous Catalytic Regenerator MTBE – Methyl Tertiary–Butyl Ether DAO – De–Asphalted Oil MW – Megawatt DCS – Di t ib t d Control Systems Distributed C t l S t NGL – N t Natural Gas Liquids l G Li id DHT – Diesel Hydrotreater NOX – Nitrogen Oxides DSU – Desulfurization Unit P–P – Propane–Propylene EPA – Environmental Protection Agency PSI – Pounds per Square Inch ESP – Electrostatic Precipitator RBOB – Reformulated Blendstock for Oxygen Blending FCC – Fluid Catalytic Cracker RDS – Resid Desulfurization GDU – Gasoline Desulfurization Unit RFG – Reformulated Gasoline GHT – Gasoline Hydrotreater RON – Research Octane Number GOHT – Gas Oil Hydrotreater RVP – Reid Vapor Pressure GPM – Gallon Per Minute SMR – Steam Methane Reformer (Hydrogen Plant) HAGO – Heavy Atmospheric Gas Oil SOX – Sulfur Oxides HCU – Hydrocracker Unit SRU – Sulfur Recovery Unit HDS – Hydrodesulfurization TAME – Tertiary Amyl Methyl Ether HDT – Hydrotreating TAN – Total Acid Number HGO – Heavy Gas Oil ULSD – Ultra–low Sulfur Diesel HOC – Heavy Oil Cracker (FCC) VGO – Vacuum Gas Oil H2 – Hydrogen VOC – Volatile Organic Compound H2S – Hydrogen Sulfide VPP – Voluntary Protection Program HF – Hydroflouric (acid) VTB – Vacuum Tower Bottoms HVGO – Heavy Vacuum Gas Oil WTI – West Texas Intermediate kV – Kilovolt WWTP – Waste Water Treatment Plant 25

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valero energy Basics of Refining Presentation - January 13, 2009

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