Posted on 02/03/2014 12:16:30 PM PST by thackney
Valero Energy Corp., the largest US independent refiner-marketer, plans to invest $730 million in upgrading two of its Texas refineries to process increased volumes of light crude sourced from the Eagle Ford shale.
The company will spend $390 million at its 160,000-b/d Houston refinery and $340 million at its 325,000-b/d Corpus Christi, Tex., refinery to add crude topping units designed to boost crude oil processing capacities at each of the plants, Valero spokesman Bill Day told OGJ.
While the addition of these units will not add to the refineries’ overall output capacities, they will allow the plants to reduce their purchases of higher-priced intermediate feedstocks from third-party suppliers in lieu of more favorably priced Eagle Ford crude, from which the refineries can produce and then process their own intermediates, Day said.
The projects, which Valero expects to have completed by yearend 2015, will expand light sweet crude processing capacities at the Houston and Corpus Christi refineries by an additional 90,000 b/d and 70,000 b/d, respectively, according to Day.
The independent refiner also plans an expansion of the crude unit at its 170,000-b/d McKee, Tex., refinery to increase throughputs of crude supplies from the nearby Permian basin. That project, which Valero expects to be completed by the end of first-quarter 2015, would lift the refinery’s crude processing capacity to just over 185,000 b/d, Day said.
The planned refinery upgrades come as part of Valero’s hope to continue maximizing on the benefits of economically attractive and advantageously located light tight oil (LTO) production from North American shale plays. “These expansions are a long-term investment in making use of our growing domestic crude supplies in a way that makes sense,” Day said. “These kinds of projects really show that domestic refiners are willing to make the necessary investments to increase domestic crude processing.”
But with these projects currently still in the planning phase and the US Senate Energy and Natural Resources Committee now examining industry cries to lift an export ban in place on what proponents have called a surplus of US domestic LTO supplies mismatched for most US refinery configurations (OGJ Online, Jan. 30, 2014; Jan. 8, 2014), nothing is a done deal, according to Day.
While Valero has expressed its concerns over easing limits on the US crude oil export embargo (OGJ Online, Jan. 17, 2014), the company is not the opponent to domestic crude exports that the general media has characterized it to be, Day said. “Valero actually holds a [crude oil] export license to export Eagle Ford crude to our refinery in Quebec, Canada, and it’s been working out quite well for us,” Day noted. “There are outlets in North America for the light crude supply coming from [US] shale production.”
As willing as Valero may be to invest in upgrading its refineries to handle increasing US LTO production, however, the lifting of the export ban without the proper economic return on US crudes from international buyers could disincentivize US refiners from making investments to accommodate the boom in LTO supplies.
Should the ban on US crude exports be lifted without those exports fetching the right price on international markets, Valero’s planned refinery upgrades likely would have to be reexamined, according to Day.
“We would have to go back to review the economics of the projects to make sure they still make sense for us,” Day said.
When the oil prices started falling, the difference between heavy and light crude got smaller. Vallero was no longer making the difference to pay for their expensive upgrades.
Now they are going to swing some back to the lighter crudes.
that should be good news, but my stock is down over 2 bucks. Doesn’t make sense.
I remember when Cold Lake was $22 off WTI.
It isn’t the only recent news:
Valero Port Arthur Said to Shut Hydrocracker as Long as Week
http://www.bloomberg.com/news/2014-01-30/valero-port-arthur-said-to-shut-hydrocracker-as-long-as-week.html
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U.S. West Coast refiners from Valero Energy Corp. (VLO) to Tesoro Corp. (TSO), lacking pipeline access to the glut of shale oil growing in the middle of the country, have been increasingly importing oil by rail to counter declining supplies in California and Alaska. California brought in a record 2.83 million barrels of oil by rail in the fourth quarter, almost double the amount from the three months prior, the state said.
“Certainly, exports to the West Coast are going to increase,” Andy Lebow, vice president at Jefferies Bache LLC in New York, said by phone. “It’s a factor in the Canadian crude differentials strengthening.”
WCS, a mixture of heavy crudes priced in Hardisty, Alberta, strengthened by 50 cents a barrel to a discount of $18 less than WTI at 2:07 p.m., according to data compiled by Bloomberg. Syncrude, a light synthetic crude, strengthened by $2.50 to a premium of $1.25 over WTI.
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Besides, if you have owned it for a few years, it is hard to really complain about a recent 2 bucks down.
I bought because of keystone, I might have to dump it if keystone doesn’t happen. Dividends kinda suck on it anyway. But I’m Texas proud and it’s home is in San Antonio so I keep it.
They ought to be seeing a decent benefit from Eagle Ford production.
I helped with a small expansion few years ago at the Three River’s refinery to take in more local oil prodution until some pipelines got built.
http://www.valero.com/OurBusiness/OurLocations/Pages/Home.aspx
Yeah but it was blended back with Lloyd.
Don’t worry, the EPA will issue a new regulation forbidding Valero from upgrading its refineries.
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