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valero energy Benicia Refinery Tour – July 9, 2007
- 1. Benicia Refinery Tour July 9, 2007 1
- 2. Agenda Basics of Refining Desulfurization Hydrocracking Valero Refining System Benicia Refinery Operations CARB Gasoline with 10% Ethanol Plant Tour 2
- 3. Rich Marcogliese Executive Vice President Refining Operations 3
- 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. 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 M-100 (resid) Arab Heavy 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 light/medium 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. 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. 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. 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. Crude and Vacuum Towers Reactor Heater Crude Atmospheric Tower Vacuum Tower Reformer 9
- 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. 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. FCC and Hydrocracker Reactors Fluidized Catalytic Cracker Reactor Hydrocracker Reactors Main Column Regenerator 12
- 13. Cokers Delayed Coker Superstructure holds the drill and drill stem Fluid Coker - Benicia while the coke is forming in the drum 13
- 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. 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. 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. Valero System Overview 17 Refineries Across Four Key Regions Conversion Capacity (mbpd) 1,800 1,600 Gulf Coast 1,720 Gulf Coast 1,720 1,400 West Coast 305 Cat Cracking West Coast 305 Mid-Con 455 1,200 Hydrocracking Mid-Con 455 Northeast 620 Northeast 620 Coking 1,000 Total 3,100 Total 3,100 800 600 400 200 Aruba 0 VL O XOM C OP RDS BP C VX M RO TS O S UN Throughput capacities in thousand barrels per day; Excludes 165,000 bpd Lima, Source: Company reports; VLO figures exclude Lima, OH refinery OH refinery 3.1 million barrels per day of High-complexity system and throughput capacity leader in conversion capacity • Scale helps mitigate effect of specific • Enables us to convert more low- outages quality, discounted feedstocks into high-quality products Geographically diverse Refining system designed for • Valero participates in four key regions feedstock flexibility Optimization among regional refining • Increased variety of heavy sour systems and resid feedstocks from 27 in 2002 to 40 in 2006 17
- 18. Valero’s Commitment to Safety Valero’s VPP Schedule Continued commitment to Texas City OSHA’s Voluntary Protection Three Rivers Program (VPP) Krotz Springs • VPP is a recognized OSHA Houston Paulsboro program for excellence in safety Wilm ington • Valero has 11 of only 23 VPP Ardm ore Star Sites in the U.S. St. Charles Corpus Christi New Process Safety Benicia Management (PSM) initiative Quebec underway McKee Del City • Created VP position in Aruba Operations to focus efforts on Port Arthur safety Mem phis • Achieve best-in-class PSM at all 20 20 20 20 20 20 20 20 20 20 20 our facilities 00 01 02 03 04 05 06 07 08 09 10 Pre-certification Certified Re-certified 18
- 19. Doug Comeau Vice President and General Manager Benicia Refinery 19
- 20. Valero Benicia Refinery Built by Exxon in 1969 on the site of the former Benicia Army Arsenal Significant modifications and upgrades have made the refinery one of the most complex and profitable refineries in the United States Valero acquired the refinery in 2000 and has made additional improvements since that time Valero acquired Huntway Refining Company in 2001 20
- 21. Aerial View of Benicia BENICIA INDUSTRIAL PARK MAIN PROCESS AREA SOUTHAMPTON ASPHALT PLANT WWT CRUDE TANKAGE BENICIA INDUSTRIES OLD TOWN BR ID GE DOCK BENICIA INDUSTRIES 21
- 22. Benicia Refinery Operations Recognized as an OSHA VPP Star Site September 2006 Total throughput of 170,000 bpd Primary products include “CARBOB” gasoline, diesel, jet fuel, LPG, fuel oil and asphalt High conversion operation 70%+ gasoline yield Located on 425 acres with 475 acre buffer zone Staffed by 480 full-time employees 200 continuing service contractors 22
- 23. Benicia Feedstocks Crude slate includes Alaska North Slope (ANS), San Joaquin Valley (SJV) and a wide variety of other crudes • 80% received by ship across Refinery docks • 20% received by pipeline Shifting crude slate • When acquired in 2000, 80% of Benicia’s crude was ANS • Today, less than 40% ANS Versatile, high-conversion facility with ability to process heavy, sour crudes • 35% heavy sour, 47% medium/light sour, 2% acidic sweet, 16% other Capable of processing imported intermediate feedstocks Primary utilities used include natural gas, electric power and fresh water 23
- 24. Benicia Products California gasoline - “CARBOB” • 80% CARBOB distributed through pipeline system • 20% finished gasoline blended at Refinery terminal Major supplier of Military jet fuel in northern California (pipeline) Refinery also produces EPA diesel fuel (pipeline) • Ultra Low Sulfur Diesel (ULSD) Unit nearing completion Flexible light-ends system allows for a variety of propane and butane dispositions and minimizes external natural gas purchases (LPG’s shipped by rail and truck) Benicia Asphalt Plant supplies 25% of northern California asphalt market (shipped by truck) 24
- 25. Benicia Capital Investments $484 MM invested in capital improvements and $233 MM for turnaround maintenance at Benicia since Valero acquisition Ultra Low Sulfur Diesel Unit (ULSD) - $105 MM Constructing New Crude Tanks (2 – 650 MB) - $60 MM Major plant-wide turnaround completed in 4Q2004 Alky expansion project commissioned in the 1Q2004 – eliminated need to export pentanes or import high octane, low vapor pressure blendstocks - $25 MM MTBE phase-out 2003 - $25 MM 51 MW cogeneration facility completed in 2002 - $60 MM 25
- 26. Benicia Projects in Development Valero Improvement Project (VIP) development under way for 2010 turnaround and beyond • Crude “Sour-up” to reduce dependence on ANS − New desalter − Sulfur removal and sulfur recovery capacity improvements • Flue gas scrubber for Coker and FCC • New hydrogen manufacturing unit − Improved energy efficiency − Greenhouse Gas (GHG) reduction 26
- 27. CARB Phase III Gasoline Model Revisions for 10% Ethanol Increasing Ethanol Content to 10% Requires a Reduction in Sulfur (ppm) (volume) 10% 20 8% 15 6% 10% 20 10 4% 5.7% 5 9 2% 0% 0 Phase III Phase III Revised Phase III Phase III Revised Depending on refinery configuration, CARB Depending on refinery configuration, CARB And a Reduction in Aromatics gasoline pool could be reduced by 2% to 4% gasoline pool could be reduced by 2% to 4% (volume) net of ethanol 25% net of ethanol Model changes drive increase in ethanol content 24% from 5.7% to 10% by volume 23% Sulfur content must be reduced to accommodate 25.0% NOx increases from ethanol 22% Sulfur reductions require additional hydrotreating of 22.3% 21% FCC gasoline 20% Aromatics change reduces reformate blending and Phase III Phase III Revised FCC gasoline cut points, which increases need for alkylate and raffinate 27
- 28. Appendix 28
- 29. Benicia Refinery Flow Diagram Naphtha to FCC Asphalt Plant Crude 11 MBPD Distillate to HCU Fuel Gas Propane ATBs Propane Off Gas Gas Oil to FCC Dimersol Light Ends Butane Vacuum 5 MBPD Gasoline PMA Distillation Asphalt VTBs Asphalt LPG 10 MBPD 6 MBPD Naphtha Naphtha Naphtha/ Naphtha/Jet Hydrotreaters Distillate Jet Fuel/Kero 45.3 MBPD Hydrotreaters Alkylation Gasoline Isobutane 55MBPD 20 MBPD Jet Fuel/Kero (2 units) Refinery Crude Crude Gas Oil P/P Distillation Asphalt Gas Oil B -B FCCU 134 MBPD Gas Oil Hydrogen 72 MBPD Gasoline Catalytic LPG Reformer FCC Feed Slurry 35 MBPD Gasoline Hydrotreater 39 MBPD ULSD ULSD LPG ATBs 16 MBPD Diesel Naphtha Hydrocracker Gas Oil Gas Oil Gasoline Vacuum 36 MBPD Naphtha/Diesel Distillation Diesel 72 MBPD Coker FCC 28 MBPD Resid Gasoline Low Sulfur Gasoline Hydrotreater 45 MBPD Coke 29
- 30. Map of Valero Refineries Quebec, Canada • 215,000 bpd capacity Benicia, California • 170,000 bpd capacity Paulsboro, New Jersey • 195,000 bpd capacity Delaware City, Delaware Wilmington, California • 210,000 bpd capacity • 135,000 bpd capacity McKee, Texas • 170,000 bpd capacity Memphis, Tennessee • 195,000 bpd capacity Three Rivers, Texas • 100,000 bpd capacity Ardmore, Oklahoma • 90,000 bpd capacity Corpus Christi, Texas • 340,000 bpd capacity Valero Marketing Krotz Springs, Louisiana • 85,000 bpd capacity Presence St. Charles, Louisiana • 250,000 bpd capacity Houston, Texas • 130,000 bpd capacity Port Arthur, Texas Texas City, Texas • 325,000 bpd capacity San Nicholas, Aruba • 245,000 bpd capacity • 275,000 bpd capacity Capacity shown in terms of crude and feedstock throughput 30
- 31. Major Refining Processes – Topping 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. 31
- 32. 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. 32
- 33. 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. 33
- 34. 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. 34
- 35. 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 35
- 36. 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. 36