valero energy Texas City Refinery Tour – November 13, 2007

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valero energy Texas City Refinery Tour – November 13, 2007

  1. 1. Texas City Refinery Tour November 13, 2007 1
  2. 2. Agenda Basics of Refining Desulfurization Hydrocracking Texas City Refinery Operations Q&A Plant Tour Concluding Remarks 2
  3. 3. Jonathan Stuart Vice President Regional Refinery Operations 3
  4. 4. 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 • High acid crudes are those with TAN greater than 0.7 4
  5. 5. Crude Oil Basics Crude Quality by Types Estimated Quality of Reserves (2006) 4.0% SOUR Cold Lake Cerro Negro 3.5% Maya WCS 3.0% Sweet Arab Heavy M-100 (resid) SULFUR CONTENT High Acid 2.5% Arab Medium 20% (Sweet) Light/Medium Dubai Napo 2% 2.0% Mars Sour Arab Light Iran Heavy 2010 13% Ameriven-Hamaca 66% 1.5% Heavy 2000 Urals 1990 Sour Alaskan North Slope 1.0% SWEET 1980 0.5% WTI Brent Tapis Cabinda Bonny Light 0.0% 15 20 25 30 35 40 45 50 Source: Oil & Gas Journal, Company Information HEAVY API GRAVITY LIGHT Source: Industry reports NOTE: Red line represents the average crude quality by decade (actual and projected) Majority of global reserves are sour Most quoted benchmark prices are light sweet crudes • WTI (West Texas Intermediate), Western Hemisphere • Brent (North Sea Crude), Europe Historical trend shows global crude supply becoming heavier and more sour 5
  6. 6. What’s in a Barrel of Crude Oil? Crude Types Characteristics Yields 2005 U.S. 3% Production > 34 API Gravity 30% Light Sweet Crude < 0.7 % Sulfur Propane/ (e.g. WTI, Brent, Saharan Refinery 8% 34% Butane 7% Gases 35% Demand Blend) 33% Most Expensive Gasoline RFG 50% Conventional 3% CARB 24 – 34 API Gravity Premium 21% Medium Sour Crude > 0.7 % Sulfur (e.g. Mars, Arab Light, 26% Arab Medium, Urals) 50% Demand Distillate 33% 50% Jet Fuel Less Expensive Diesel Heating Oil 1% < 24 API Gravity 14% Heavy 10% > 0.7 % Sulfur Fuel Oil & 22% Heavy Sour Crude 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 6
  7. 7. Basic Refining Concepts Intermediates Final Products < 90°F Propane, Butane • Refinery fuel gas and lighter • Propane • NGLs Straight Run 90–220°F More • Gasoline (high octane) Gasoline (low processing 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) Residual Fuel More 800+°F • Diesel Oil/Asphalt • Fuel oil processing • Lube stocks 7
  8. 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 Distillate 34% Desulfurizer Jet Fuel Crude Diesel LS Diesel/Heating Oil HS Diesel/Heating Oil Heating Oil Heavy Gas Oil Vacuum Fuel Oil & 32% Unit Other Heavy Fuel Oil 100% Total Yield Simple, low upgrading capability refineries run sweet crude 8
  9. 9. Crude and Vacuum Towers Reactor Heater Crude Atmospheric Tower Vacuum Tower Reformer 9
  10. 10. 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 27% 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 Oil Vacuum Cracker Unit FCC Gasoline (FCC) Heavy Fuel Oil & 24% 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
  11. 11. High Conversion: Coking/Resid Destruction Hydrogen Plant Crude Gas Unit Propane/ 7% Butane Propane/Butane Gasoline RFG Distillation Tower 58% Reformer High Octane Gasoline Conventional Low Octane Gasoline CARB and Naphtha Medium/ Premium Hydrogen Heavy Distillate Distillate 28% 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 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
  12. 12. FCC and Hydrocracker Reactors Fluidized Catalytic Cracker Reactor Hydrocracker Reactors Main Column Regenerator 12
  13. 13. Cokers Delayed Coker Superstructure holds the drill and drill stem Fluid Coker - Benicia while the coke is forming in the drum 13
  14. 14. 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 Arab Medium Hydroskimming LLS Cracking Maya Coking Need conversion capacity to capitalize on sour crude discounts • Hydroskim – Breakeven or moderate margins; High resid yield − When margins are positive – increase crude runs − When margins are negative – decrease crude runs • Cracking – Better margins; Lower resid yield • Coking – Best margins; Lowest resid yield − Maximize heavy crudes 14
  15. 15. Desulfurization Basics Objective Remove sulfur from light products (gasoline or diesel) to meet air quality requirements for clean burning fuels Desulfurization Unit Desulfurized Light Products HC H2 High Sulfur HC-S HC-S HC-S Light H2 Elemental H2 Products Catalyst Sulfur Plant Sulfur (HC-S) • Agricultural HC-S HC-S H2S S S S • Pharmaceutical H2 S HC-S S S 2 H Hydrogen Unit LEGEND H2 LEGEND H2 H2 HC : : Hydrocarbon HC Hydrocarbon H2 1000 or less PSI; H2 : : Hydrogen H2 H2 H2 Hydrogen 700 F or less S : : Sulfur S Sulfur 15
  16. 16. 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 fuels Hydrocracking Unit 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) Catalysts H2 Elemental H2 Sulfur Plant Sulfur HC-S H2 H2 HC-S • Agricultural H2S S H2 S S • Pharmaceutical HC-S S S S 2 H Hydrogen Unit LEGEND H2 LEGEND H2 H2 HC : : Hydrocarbon HC Hydrocarbon 1300+ PSI; H2 H2 : : Hydrogen H2 H2 H2 Hydrogen 725 to 780 F S : : Sulfur S Sulfur 16
  17. 17. Michael Harrison Vice President and General Manager Texas City Refinery 17
  18. 18. Valero Texas City Refinery Acquired by Valero in 1997 via purchase of Basis Petroleum from Solomon, Inc. Located along Houston’s Deep Water Ship Channel at the Port of Texas City Began operations in 1908. Supported World Wars I and II Throughput capacity of 245,000 barrels per day of crude and other feedstocks Produces gasoline, jet fuel, diesel, LPG, sulfur and chemical feedstocks 18
  19. 19. Valero Texas City Refinery Staffed by over 500 full-time employees and 300 continuing service contractors Recognized as an “OSHA VPP Star Site” Received VPP “Star Among Stars Status in 2003 Received VPP “Spirit Award” in 2004 19
  20. 20. Texas City Products and Feedstock Slate Typical Product Slate Typical Feedstock Slate Product BPD % Crude S % / API BPD % Arab Medium / Kuwait 2.7 / 30.7 106,000 46 Gasoline 94,000 40 Ultra Low Sulfur Diesel 50,000 21 Maya 3.5 / 21.1 90,000 39 Jet Fuel 36,000 15 Green Canyon 2.2 / 30.4 14,000 6 Diesel Intermediates 26,000 11 High Sulfur VGO 5.0 / 12.2 7,000 3 Low Sulfur VGO 15,000 6 Residual Oil 6.3 / 4.2 7,000 3 Propylene 11,000 4 Gasoline Components 6,000 3 Propane 3,000 1 Total 230,000 100 Petroleum Coke 4,000 <1 (tons/day) Sulfur (tons/day) 800 <1 Total Liquid Products 235,000 20
  21. 21. Texas City Capital Investments Over $900 MM invested in capital improvements and $300 MM for turnaround maintenance at Texas City since Valero’s acquisition • Delayed Coker Unit – 45 MBPD Capacity − Started up in 2003 • Gasoline Desulfurization Unit – 48 MBPD Capacity − Started up in 2003 • LPG Recovery Unit – 35 MM SCF/D Capacity − Started up in 2004 • Steam Boilers (3) − Started up in 2005 and 2006 • Electrical Substation − Operational in 2006 • Administrative Office and Central Control Center − Occupied May 2005 • Major plant turnaround just completed ($80 MM Turnaround Maintenance and $70 MM Capital Improvements). 21
  22. 22. Appendix 22
  23. 23. Texas City Refinery Flow Diagram 23
  24. 24. 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. • 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. 24
  25. 25. 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. 25
  26. 26. 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. 26
  27. 27. 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. 27
  28. 28. 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 28
  29. 29. 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. 29

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