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valero energy St. Charles Refinery Tour – April 6, 2008

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  • 1. St. Charles Refinery Tour April 6, 2008 Management Presentation
  • 2. Agenda Basics of Refining St. Charles Refinery Operations Q&A Plant Tour Concluding Remarks 1
  • 3. Gary Simmons Vice President Planning and Economics 2
  • 4. Crude Oil Characteristics Crude oils are classified and priced by density and sulfur content Crude 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 3
  • 5. Crude Oil Basics Crude Oil Quality by Types Estimated Quality of Reserves (2007) 4.0% SOUR Cold Lake Cerro Negro 3.5% Maya WCS 3.0% Sweet M-100 (resid) Arab Heavy SULFUR CONTENT High Acid 2.5% Arab Medium 19% (Sweet) Light/Medium Dubai 1% Napo 2.0% Mars Sour Arab Light Iran Heavy 2010 14% Ameriven-Hamaca 1.5% 66% 2000 Heavy Urals 1990 Sour Alaskan North Slope 1.0% 1980 SWEET 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 NOTE: Red line represents the average crude oil quality by decade (actual and projected) Majority of global crude oil reserves are light/medium sour Most 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 4
  • 6. What’s in a Barrel of Crude Oil? Crude Oil Types Characteristics Yields 2006 U.S. 3% Production > 34 API Gravity 32% Light Sweet < 0.7 % Sulfur Propane/ (e.g. WTI, LLS, Brent) Refinery 8% 30% Butane 8% Gases 35% Demand Most Expensive 35% Gasoline RFG 49% Conventional 2% CARB 24 – 34 API Gravity Premium 24% Medium Sour > 0.7 % Sulfur (e.g. Mars, Arab Light, 26% Arab Medium, Urals) 50% Demand Distillate 33% 48% Jet Fuel Less Expensive Diesel Heating Oil 1% < 24 API Gravity 15% Heavy 10% > 0.7 % Sulfur Fuel Oil & 21% Heavy Sour Other 15% Demand (e.g. Maya, Cerro Negro, Cold Lake, Western Canadian Select) Source: EIA Refiner Production 63% Least Expensive Refineries upgrade crude oil to higher value products 5
  • 7. Basic Refining Concepts Intermediates Final Products < 90°F Propane, Butane • Refinery fuel gas and lighter • Propane • NGLs Light Straight 90–220°F More • Gasoline (high octane) Run Gasoline processing (low octane) Crude oil More 220–315°F • Gasoline (high octane) Naphtha • Jet fuel Distillation processing Tower • Kerosene (Crude More 315–450°F • Jet fuel Unit) Kerosene • Diesel processing • Fuel oil • Gasoline (high octane) More 450–650°F Light Gas Oil • Diesel Furnace processing • Fuel oil • Gasoline (high octane) More 650–800°F Heavy Gas Oil • Diesel Vacuum processing • Fuel oil Unit • Gasoline (high octane) More 800+°F • Diesel Resid, Pitch • Heavy Fuel Oil, Asphalt processing • Lube stocks 6
  • 8. Hydroskimming/Topping Refinery Crude Unit Propane/ 4% Propane/Butane Butane Gasoline Reformer High Octane Gasoline Low Octane Gasoline RFG Distillation Tower 30% and Naphtha Conventional CARB Hydrogen Premium Light Distillate HS Kerosene/Jet Fuel Sweet LS Kerosene/Jet Fuel Desulfurizer Distillate Crude Diesel 34% LS Diesel/Heating Oil HS Diesel/Heating Oil Heating Oil Oil Jet Fuel Heavy Gas Oil Vacuum Fuel Oil & 32% Unit Other Heavy Fuel Oil / Resid 100% Total Yield Simple, low upgrading capability refineries run light sweet crude oil, yet produce a high yield of heavy fuel oil and resid 7
  • 9. Medium Conversion: Catalytic Cracking Crude Propane/ Unit 8% Butane Propane/Butane Gasoline RFG Reformer High Octane Gasoline Low Octane Gasoline 45% Conventional and Naphtha Distillation Tower CARB Premium Hydrogen Distillate Light LS Kerosene/Jet Fuel HS Kerosene/Jet Fuel Desulfurizer Distillate Sour Diesel 27% HS Diesel/Heating Oil LS Diesel/Heating Oil Heating Oil Crude Jet Fuel Light Cycle Oil (LCO) Alkylation Alkylate Unit Fluid Catalytic Gas Oil Vacuum Cracker Unit FCC Gasoline (FCC) Heavy Fuel Oil & 24% Other Heavy Fuel Oil / Resid 104% Total Yield Refineries with moderate upgrading capabilities tend to run more sour crude oils while increasing yields of higher value product and experiencing volume gain 8
  • 10. High Conversion: Coking/Resid Destruction Hydrogen Plant Crude Gas Unit Propane/ 7% Butane Propane/Butane Gasoline RFG Distillation Tower 58% Reformer Conventional High Octane Low Octane Gasoline CARB Medium/ Premium Hydrogen Heavy Distillate Distillate Kerosene Kerosene/Jet Fuel Sour Desulfurizer Jet Fuel 28% Diesel Crude Heating Oil Diesel/Heating Oil Diesel Oil Hydrocracker Hydrocrackate Gasoline Light Gas Oil Ultra Low Sulfur Jet/Diesel LCO Alkylation Alky Gasoline Unit Fluid Catalytic Cracker (FCC) Medium Gas Oil Vacuum FCC Gasoline Unit Heavy 15% Fuel Oil & Other Delayed Heavy Fuel Oil Coke Coker 108% Total Yield Complex refineries can run heavier and more sour crude oils while achieving the highest yields of light products and greatest volume gain 9
  • 11. Conversion Economics U.S. Gulf Coast Refinery Margins 30 25 20 15 US$/Bbl 10 5 0 (5) (10) Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Arab Medium Hydroskimming LLS Cracking Maya Coking 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 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 10
  • 12. Comparison of Conversion Capacity U.S. Conversion Capacity1 MBPD 1,800 1,600 Cat Cracking 1,400 Hydrocracking 1,200 Coking 1,000 800 600 400 200 0 VLO XOM COP BP CVX RDS MRO TSO SUN Conversion Capacity = Sum of Coking, Hydrocracking and Cat Cracking Capacity 1 Source: Oil & Gas Journal, Company Websites Valero is an industry leader in upgrading capacity Valero’s upgrading capacity provides superior operational flexibility Significant capital investment and long lead time required to add conversion capacity 11
  • 13. Ralph Phillip Vice President and General Manager St. Charles Refinery 12
  • 14. 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 13
  • 15. 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 14
  • 16. St. Charles Products and Feedstock Slate Typical Product Slate Typical Feedstock Slate Product MBPD % Crude S % / API MBPD % Maya 3.6 / 20.3 85 37 Gasoline 85 36 Ultra Low Sulfur Diesel 72 31 M-100 2.4 / 14.5 65 28 High Sulfur VGO 40 17 Mars 1.9 / 30.3 10 4 Alkylate 17 7 Total Crude 160 70 Propylene 4 9 LSVGO 0.4 / 24.5 45 19 Slurry (Fuel Oil) 3 7 LSATB 0.5 / 22.5 15 6 Mixed LPG 2 4.5 Total Cat Feed 60 26 Propane 0 0.3 100 Total Liquid Products 235 Total LCO 0.85 / 18.5 5 2 Pet Coke (Tons/day) <1 3,900 Sulfur (Tons/day) <1 450 Total Naphtha 0.03 / 60 3 1 Total Butylene 3 1 Total 231 100 15
  • 17. St. Charles’ Capital Investments 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 increase Completed in 2004 • Gasoline Desulfurization Unit 60 MBPD Capacity Started up in 2005 • Utility Systems Upgrades New 650# Boiler in 2005 Refinery water system in 2007 • HT/HC Combination Unit 58 MBPD Capacity Started up in 2007 • SMR Hydrogen Units 100 MMSCFD Capacity Started up in 2007 • Facilities Upgrades New Laboratory in 2005 New East plant control room in 2007 New Maintenance facility in 2008 16
  • 18. St. Charles’ Capital Investments $1.4 Billion Refinery Upgrade and Expansion New 50,000 BPD Gas Oil Hydrocracker 45,000 BPD Crude Expansion to 235,000 BPD 10,000 BPD Coker Expansion to 80,000 BPD Increases ULSD production by 49,000 BPD Target 2Q 2010 Completion $2 Billion CCR/Aromatics Complex New 75,000 BPD Continuous Catalytic Reformer Upgrades Naphtha from Valero Hydrocrackers Produces 33,000 BPD Para-xylene Produces 17,000 BPD Benzene Target 1Q 2011 Completion Positions refinery for long term competitiveness 17
  • 19. Appendix 18
  • 20. St. Charles Refinery Flow Diagram 19
  • 21. Optimizing Refining Portfolio Quebec, Canada • 215,000 bpd capacity • 7.8 Nelson complexity Benicia, California • 170,000 bpd capacity • 15.0 Nelson complexity Paulsboro, New Jersey • 195,000 bpd capacity • 9.1 Nelson complexity Wilmington, California Delaware City, Delaware • 135,000 bpd capacity • 210,000 bpd capacity • 15.9 Nelson complexity • 13.2 Nelson complexity Lima, Ohio • 165,000 bpd capacity • SOLD in 2007 McKee, Texas • 170,000 bpd capacity • 9.4 Nelson complexity Memphis, Tennessee • 195,000 bpd capacity • 7.5 Nelson complexity • Under Strategic Evaluation Three Rivers, Texas • 100,000 bpd capacity • 12.4 Nelson complexity Ardmore, Oklahoma Corpus Christi, Texas • 90,000 bpd capacity • 315,000 bpd capacity • 10.9 Nelson complexity • 18.4 Nelson complexity Krotz Springs, Louisiana • 85,000 bpd capacity St. Charles, Louisiana Texas City, Texas • 6.5 Nelson complexity • 250,000 bpd capacity • 245,000 bpd capacity • Under Strategic Evaluation • 14.3 Nelson complexity • 10.8 Nelson complexity Legend Houston, Texas Port Arthur, Texas San Nicholas, Aruba Valero Marketing Presence • 145,000 bpd capacity • 310,000 bpd capacity • 275,000 bpd capacity • 15.1 Nelson complexity • 11.8 Nelson complexity • 7.0 Nelson complexity Core Refinery • Under Strategic Evaluation Non-Core Refinery Under Strategic Evaluation Capacity shown in terms of crude and feedstock throughput 20 Source: Nelson complexities, Oil & Gas Journal and Valero estimates
  • 22. 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. 21
  • 23. 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. 22
  • 24. 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. • 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. 23
  • 25. 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. 24
  • 26. 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 – Distributed Control Systems NGL – Natural Gas Liquids 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 (adic) VTB – Vacuum Tower Bottoms HVGO – Heavy Vacuum Gas Oil WTI – West Texas Intermediate kV – Kilovolt WWTP – Waste Water Treatment Plant 25
  • 27. 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 1934. The words quot;believe,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 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. 26

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