The document provides an overview of refining 101 and crude oil characteristics. It discusses different types of crude oil classified by density and sulfur content, and how refineries upgrade crude oil into higher value products through distillation and additional processing units. It also summarizes some of the challenges refineries may face in processing lighter crudes due to higher volumes of light intermediates produced.
The document provides an overview of refining 101 and crude oil characteristics. It discusses different types of crude oil classified by density and sulfur content, and how refineries upgrade crude oil into higher value products through distillation and additional processing units. It also summarizes some of the challenges refineries may face in processing lighter crudes due to higher volumes of light intermediates produced.
The document provides an overview of refining 101 and crude oil characteristics. It discusses different types of crude oil classified by density and sulfur content, and how refineries upgrade crude oil into higher value products through distillation and additional processing units. It also summarizes some of the challenges refineries may face in processing lighter crudes due to higher volumes of light intermediates produced.
The document provides an overview of refining 101 and crude oil characteristics. It discusses different types of crude oil classified by density and sulfur content, and how refineries upgrade crude oil into higher value products through distillation and additional processing units. It also summarizes some of the challenges refineries may face in processing lighter crudes due to higher volumes of light intermediates produced.
Statements contained in this presentation that state the Companys or managements 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 believe, expect, should, estimates, and other similar expressions identify forwardlooking statements. It is important to note that actual results could differ materially from those projected in such forwardlooking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valeros annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission, and available on Valeros website at www.valero.com.
Lane Riggs Senior Vice President Refining Operations
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 Becoming more important, particularly as Brazilian production increases 4
Crude Oil Basics
Crude Oil Quality by Types 4.0% SOUR
3.5% 3.0%
Cold Lake Cerro Negro Maya WCS M-100 (resid) Arab Heavy Arab Medium Napo Iran Heavy AmerivenHamaca Alaskan North Slope WTI Dubai Mars Arab Light Urals
Estimated Quality of Reserves (2012)
SULFUR CONTENT
Sweet High Acid (Sweet) 23% 3% Heavy Sour 18% Light/Medium Sour 56%
2.5% 2.0% 1.5%
SWEET
1.0% 0.5% 0.0% 15 20
Brent Cabinda
LLS
Eagle Ford and Bakken
Tapis
Bonny Light
25
30
35
40
45 LIGHT
50 Source: DOE, Oil & Gas Journal, Company Information
HEAVY Source: Industry reports
API GRAVITY
Majority of global crude oil reserves are sour Most quoted benchmark prices are light sweet crude oils WTI (West Texas Intermediate), Western Hemisphere Brent (North Sea Crude), Europe Tapis/Oman (Middle East), Asia Pacific 5
Complex refineries can run heavier and more sour crudes while achieving the highest light product yields and volume gain
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Cokers Delayed Coker Superstructure holds the drill and drill stem while the coke is forming in the drum Fluid Coker
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Gary Simmons Vice President Crude, Feedstock Supply & Trading
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Hydrocracking Basics Objective Upgrade high sulfur vacuum gasoil (VGO) to low sulfur light products (diesel, jet, and gasoline) 20% to 30% volume expansion due to hydrogen saturation; gas to liquids! Favorable economics, especially when natural gas is relatively cheap versus crude oil Hydrocracking Unit HC
Desulfurized Hydrocrackate Gasoline Desulfurized Ultra Low Sulfur Jet/Diesel Elemental Sulfur Sulfur Plant Agricultural S S S Pharmaceutical S S S
High Sulfur VGO (HC-S)
HC-S HC-S H2
H2 H2
HC-S HC
H2 H2 Catalysts H2 H2 HC-S H2 H2 HC-S H2 HC-S
H2S
Hydrogen Unit H2 H2 H2 H2 H2 H2 1300+ PSI; 725 to 780 F
LEGEND HC : Hydrocarbon H2 : Hydrogen S : Sulfur
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Key Drivers for Valeros Hydrocrackers
Key economic driver is the expected significant liquid-volume expansion of 20%, which primarily comes from the hydrogen saturation via the highpressure, high-conversion design Designed to maximize distillate yields Hydrocracker Unit Feedstocks High-sulfur VGO 60,000 BPD (Internally produced or purchased)
Hydrocracker Unit Operating Costs Heat, power, labor, etc. $1.50 per barrel (per barrel amount based on hydrocracker unit volumes)
Hydrogen
124 MMSCF/day
(via 40,000 mmbtu/day of natural gas)
Hydrocracker Unit Products (BPD)
Distillates (diesel, jet, kero) Gasoline and blendstocks LPGs Low-sulfur VGO Total 44,000 24,000 3,000 1,000 72,000
Synergies with Plant With existing plant ~$1 per barrel
(per barrel amount based on hydrocracker unit volumes)
12,000 BPD (20%) volume expansion
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Port Arthur Hydrocracker
Hydrocracker Unit
Hydrocracker Reactors 16
Refinery Optimization Key Model Inputs Feedstock and product properties Feedstock and product prices Operating unit configuration/yields Operating unit constraints Feedstock and product prices Key Model Outputs Refinery operating rates Feedstock selections
Refinery LP Model
Product yields/cut points targets Product production volumes Intermediate sales and purchases
Valero uses linear programming models (LP) to optimize its refineries LPs are complex models that incorporate: Representations of each refinery units operations Every potential feedstock, intermediate, and product Takes into account varying properties and pricing
LP results guide decisions on refinery utilization, feedstock purchases, and product yields Valero does this by unit, by refinery, and across its portfolio of refineries 17
Typical Refining Unit Volume Gain/Loss
Refining Unit Volume Gain/Loss on feedstock to unit
Reformer running at High severity Low severity FCC Alkylation Coker - 30% to - 20% - 20% to - 10% + 5% to + 15%
Gulf Coast Refineries and Growing Availability of Domestic Light Sweet Crude Oil Growing supply of domestic light sweet crude is expected to provide a structural discount for Gulf Coast light sweet crudes How do you deal with growing supply of cheaper light sweet volumes? 1. Back out imports from existing light sweet capacity 2. Fill previously uneconomic light sweet capacity 3. Additional light sweet crude runs will need to displace heavier crude oil volumes 4. Pursue projects that address constraints to using light sweet crudes
Refinery configuration plays a large part in determining the suitability of crudes and feedstocks in a given refinery Crude and feedstock selection is based on the relative economics of available choices assisted by analysis using LP models 19
Issues with Processing Light Crudes
Refineries are designed for a specific range of crude oil properties Otherwise construction costs would be prohibitively high Lighter crudes contain significantly more light components, e.g., propane, butane, straight run gasoline, naphtha Intermediates < 90F C1 to C4 90220F C5 to C8
Final Products Refinery fuel gas Propane NGLs More processing
Propane, Butane and lighter Straight Run Gasoline (low octane)
Distillation Tower (Crude Unit)
Gasoline (high octane)
220315F C8 to C12
Naphtha
More processing
Gasoline (high octane) Jet fuel
Be careful about generalizing crude oil properties and their impact on product yields Some light crudes are inherently diesel rich or inherently gasoline rich despite having a similar API gravity As we have shifted our diet to higher API domestic shale crudes (Eagle Ford, Bakken, etc.), we have seen distillate yields stay about the same 20
Key Constraints Many factors can constrain the ability to process light components Constraints are very specific to each refinery and individual crude unit within a refinery They may occur in the crude unit itself, or in the downstream processing of lighter components into finished products Examples include: Distillation tower has insufficient capacity for light components Hydraulic capacity of overhead distillation hardware Heater or heat exchanger design limits ability due to insufficient heater flexibility or limited ability to cool and condense higher volume of light ends Saturated gas plant has insufficient capacity to process additional volume Downstream processing capacity limits ability to convert intermediates into finished products
Depending on the constraint, solutions can range from $10 million to hundreds of millions 21
Valeros Ability to Run Discounted Light Crude
Valero has increased the amount of domestic light crudes processed as additional volumes have become available
Valero has ceased all imports of foreign light crudes for its Gulf Coast and Memphis refineries Valero is evaluating potential projects to further increase its domestic light crude processing capacity
Port Arthur 57,000 BPD Port Arthur hydrocracker complete and operating above expectations Higher diesel quality with cetane numbers in the low 60s versus expected low 50s Exceeds European specifications by over 10 cetane numbers Provides blending opportunity to upgrade margin on lower-quality distillate production
St. Charles
Product yields exceeding expectations with total distillate yield of approximately 69% versus expected 61%
Estimate 60,000 BPD St. Charles HCU mechanical completion and operating in 2Q13 Both hydrocrackers are designed to benefit from the high crude and low natural gas price outlook Pursuing projects to expand capacity of each unit to 75,000 BPD in 2015 24
Valeros Hydrocracker Projects Show Profits Under Various Price Sets
millions
Estimated Annual EBITDA Contribution
St. Charles Hydrocracker Project Port Arthur Hydrocracker Project
$1,600 $1,400
$1,200 $1,000 $800 $600 $400 $200
$0 2008 Prices 2009 Prices 2010 Prices 2011 Prices 2012 Prices 25 Note: EBITDA = Pretax operating income + depreciation and amortization, excludes interest expense; see details in appendix
Q&A
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Appendix
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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 lowerpressure distillation process. Means to lower the boiling points of the fractions and permit separation at lower temperatures, without decomposition and excessive coke formation.
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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 noncatalytic 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 noncatalytic 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. 29
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 highvalue 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 selfignition. 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.
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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.
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List of Refining Acronyms
AGO Atmospheric Gas Oil ATB Atmospheric Tower Bottoms BB ButaneButylene Fraction BBLS Barrels BPD Barrels Per Day BTX Benzene, Toluene, Xylene CARB California Air Resource Board CCR Continuous Catalytic Regenerator DAO DeAsphalted Oil DCS Distributed Control Systems DHT Diesel Hydrotreater DSU Desulfurization Unit EPA Environmental Protection Agency ESP Electrostatic Precipitator FCC Fluid Catalytic Cracker GDU Gasoline Desulfurization Unit GHT Gasoline Hydrotreater GOHT Gas Oil Hydrotreater GPM Gallon Per Minute HAGO Heavy Atmospheric Gas Oil HCU Hydrocracker Unit HDS Hydrodesulfurization HDT Hydrotreating HGO Heavy Gas Oil HOC Heavy Oil Cracker (FCC) H2 Hydrogen H2S Hydrogen Sulfide HF Hydroflouric (acid) HVGO Heavy Vacuum Gas Oil kV Kilovolt kVA Kilovolt Amp LCO Light Cycle Oil LGO Light Gas Oil LPG Liquefied Petroleum Gas LSD Low Sulfur Diesel LSR Light Straight Run (Gasoline) MON Motor Octane Number MTBE Methyl TertiaryButyl Ether MW Megawatt NGL Natural Gas Liquids NOX Nitrogen Oxides PP PropanePropylene PSI Pounds per Square Inch RBOB Reformulated Blendstock for Oxygen Blending RDS Resid Desulfurization RFG Reformulated Gasoline RON Research Octane Number RVP Reid Vapor Pressure SMR Steam Methane Reformer (Hydrogen Plant) SOX Sulfur Oxides SRU Sulfur Recovery Unit TAME Tertiary Amyl Methyl Ether TAN Total Acid Number ULSD Ultralow Sulfur Diesel VGO Vacuum Gas Oil VOC Volatile Organic Compound VPP Voluntary Protection Program VTB Vacuum Tower Bottoms WTI West Texas Intermediate WWTP Waste Water Treatment Plant
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Project Price Set Assumptions
Prices shown below are for illustrating a potential estimate for Valeros economic projects Price assumptions are based on a blend of recent market prices and Valeros price forecast
Commodity LLS Crude oil1 LLS - USGC HS Gas Oil USGC Gas Crack USGC ULSD Crack
Base Case ($/barrel) 85.00 -3.45 6.00 11.00 5.00
2008 ($/barrel) 102.07 2.03 2.47 20.5 8.90
2009 ($/barrel) 62.75 -2.86 6.91 7.26 4.16
2010 ($/barrel) 81.64 -2.72 5.32 8.94 4.38
2011 ($/barrel) 111.09 -5.75 5.11 13.24 4.03
2012 ($/barrel) 112.20 -7.59 4.66 15.99 2.71
Natural Gas, $/MMBTU (NYMEX)
1LLS
prices are roll adjusted
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Project Price Sensitivities
Price sensitivities shown below are for illustrating a potential estimate for Valeros economic projects Price assumptions are based on a blend of recent market prices and Valeros price forecast EBITDA1 Sensitivities (Delta $ millions/year) Port Arthur HCU St. Charles HCU
Crude oil, + $1/BBL
Crude oil - USGC HS Gas Oil, + $1/BBL
4 16.7
3.6 17.8
USGC Gas Crack, + $1/BBL
USGC ULSD Crack, + $1/BBL Natural Gas, - $1/MMBTU Total Investment IRR to 10% cost
12.9 18.4 18.3 1.3%
13.3 20.8 19.7 1.5%
1Operating
income before depreciation and amortization expense
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Investor Relations Contacts
For more information, please contact: Ashley Smith, CFA, CPA Vice President, Investor Relations 210.345.2744 [email protected] Matthew Jackson Investor Relations Specialist 210.345.2564 [email protected]
Refining 101 + Technical Teach Refining 101 + Technical Teach - in On The in On The Hydrotreater Hydrotreater & Hydrocracker & Hydrocracker Hydrotreater Hydrotreater & Hydrocracker & Hydrocracker
Refining 101 + Technical Teach Refining 101 + Technical Teach - in On The in On The Hydrotreater Hydrotreater & Hydrocracker & Hydrocracker Hydrotreater Hydrotreater & Hydrocracker & Hydrocracker
