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1
Benicia Refinery TourJuly 9, 2007
2
Basics of Refining
Desulfurization
Hydrocracking
Valero Refining System
Benicia Refinery Operations
CARB Gasoline with 10% Ethanol
Plant Tour
Agenda
3
Rich MarcoglieseExecutive Vice President
Refining Operations
4
Crude Oil Characteristics
Crudes are classified and priced by density and sulfur contentCrude 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
5
Crude Oil Basics
Majority of global reserves are light/medium sourMost 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
Estimated Quality of Reserves (2006)
13%
20%
66%
2%
High Acid(Sweet)
Source: Oil & Gas Journal, Company Information
Light/MediumSour
HeavySour
Sweet
SWEE
T
SU
LFU
R C
ON
TEN
T
S
OU
R
HEAVY API GRAVITY LIGHT
Crude Quality by Types
Source: Industry reportsNOTE: Red line represents the average crude quality by decade (actual and projected)
Arab Heavy
Arab Medium
Arab Light
Alaskan North Slope
Iran Heavy
DubaiMars
TapisWTIBrent
Bonny LightCabinda
Napo
Cold Lake
WCSMaya
Ameriven-Hamaca
M-100 (resid)
1980
19902000
2010
Urals
Cerro Negro
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
15 20 25 30 35 40 45 50
6
What’s in a Barrel of Crude Oil?
50%
26%
21%
3%
63%
22%
14%1%
33%
34%
30%
3%
> 34 API Gravity
< 0.7 % Sulfur
35% Demand
Most Expensive
24 – 34 API Gravity
> 0.7 % Sulfur
50% Demand
Less Expensive
< 24 API Gravity
> 0.7 % Sulfur
15% Demand
Least Expensive
Refineries upgrade crude oil to higher value products
2005 U.S. Production
8% Propane/Butane
50%
GasolineRFGConventionalCARBPremium
33% DistillateJet FuelDieselHeating Oil
Heavy Fuel Oil & Other
10%
Source: EIA Refiner Production
Refinery Gases7%
Light Sweet Crude(e.g. WTI, Brent, Saharan
Blend)
Medium Sour Crude(e.g. Mars, Arab Light,Arab Medium, Urals)
Heavy Sour Crude(e.g. Maya, Cerro Negro, Cold
Lake, Western Canadian Select)
Crude Types Characteristics Yields
7
Basic Refining Concepts
DistillationTower
(CrudeUnit)
Propane, Butane and lighter
• Refinery fuel gas • Propane• NGLs
< 90°F
Straight Run Gasoline (low
octane)• Gasoline (high octane)
90–220°F
Naphtha • Gasoline (high octane)• Jet fuel
220–315°F
Kerosene• Kerosene • Jet fuel• Diesel • Fuel oil
315–450°F
Light Gas Oil• Gasoline (high octane)• Diesel• Fuel oil
450–650°F
Heavy Gas Oil650–800°F
Residual Fuel Oil/Asphalt
800+°F
Furnace
VacuumUnit
More
• Gasoline (high octane)• Diesel• Fuel oil
• Gasoline (high octane)• Diesel• Fuel oil• Lube stocks
Intermediates Final Products
processing
More
processing
More
processing
More
processing
More
processing
More
processing
Crude oil
8
Hydroskimming/Topping Refinery
LightSweetCrude
100% Total Yield
Heavy Fuel Oil & Other
30%GasolineRFGConventionalCARBPremium
Simple, low upgrading capability refineries run sweet crude
Propane/Butane
Hydrogen
Crude Unit
Vacuum Unit
Reformer
Propane/Butane
High Octane Gasoline
Heavy Fuel Oil
LS Diesel/Heating Oil
Distillate Desulfurizer
HS Diesel/Heating Oil
HS Kerosene/Jet Fuel
Gas Oil
4%
32%
34% DistillateJet FuelDieselHeating Oil
Dis
tilla
tion
Tow
er
Low Octane Gasoline and Naphtha
LS Kerosene/Jet Fuel
9
Crude and Vacuum Towers
Crude Atmospheric Tower Vacuum Tower Reformer
Heater
Reactor
10
Medium Conversion: Catalytic Cracking
Moderate upgrading capability refineries tend to run more sour crudeswhile achieving increased higher value product yields and volume gain
Hydrogen
Light Cycle Oil (LCO)
Crude Unit
Vacuum Unit
Reformer
Alkylation Unit
Propane/Butane
High Octane Gasoline
Heavy Fuel Oil
FCC Gasoline
Alkylate
Distillate Desulfurizer
HS Diesel/Heating Oil
HS Kerosene/Jet Fuel
Gas OilFluid Catalytic Cracker (FCC)
104% Total Yield
Heavy Fuel Oil & Other24%
Dis
tilla
tion
Tow
er
Propane/Butane8%
27% DistillateJet FuelDieselHeating Oil
45%GasolineRFGConventionalCARBPremium
LightSour
Crude
Low Octane Gasoline and Naphtha
LS Kerosene/Jet Fuel
LS Diesel/Heating Oil
11
High Conversion: Coking/ResidDestruction
Complex refineries can run heavier and more sour crudes while achieving the highest light product yields and volume gain
108% Total Yield
Heavy Fuel Oil & Other15%
Propane/Butane7%
28% DistillateJet FuelDieselHeating Oil
58%GasolineRFGConventionalCARBPremium
Hydrogen
LCO
Reformer
Medium Gas Oil
Propane/Butane
Heavy Fuel Oil
FCC Gasoline
Alky Gasoline
Hydrogen Plant
Coke
Gas
DelayedCoker
Fluid Catalytic Cracker (FCC)
Alkylation Unit
DistillateDesulfurizer
Crude Unit
Vacuum Unit
Light Gas Oil Hydrocrackate Gasoline
Ultra Low Sulfur Jet/Diesel
Hydrocracker
Medium/Heavy Sour
Crude Dis
tilla
tion
Tow
er Low Octane Gasoline and Naphtha
HS Kerosene/Jet Fuel
HS Diesel/Heating Oil
LS Kerosene/Jet Fuel
LS Diesel/Heating Oil
High Octane Gasoline
12
FCC and Hydrocracker ReactorsReactor
RegeneratorMain Column
Hydrocracker ReactorsFluidized Catalytic Cracker
13
CokersDelayed Coker
Superstructure holds the drill and drill stem while the coke is forming in the drum Fluid Coker - Benicia
14
Conversion Economics
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
U.S. Gulf Coast Refinery Margins
(10)
(5)
0
5
10
15
20
25
30
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
U S
$ /
B b
l
Arab Medium Hydroskimming LLS Cracking Maya Coking
15
Desulfurization Basics
High SulfurLight
Products(HC-S)
Desulfurization Unit
Sulfur Plant• Agricultural• Pharmaceutical
Desulfurized Light Products
ElementalSulfur
HC-S
HC-SSHC-S
SS
Catalyst
HC-SS
HC-S
S
HC
H2S S
HC-S
H2
Hydrogen UnitH2
H2H2
H2
H2H2
H2
H2H2
H2
LEGENDHC : HydrocarbonH2 : HydrogenS : Sulfur
LEGENDHC : HydrocarbonH2 : HydrogenS : Sulfur
1000 or less PSI;700 F or less
ObjectiveRemove sulfur from light products (gasoline or diesel) to meet air quality requirements for clean burning fuels
16
Hydrocracking Basics
LEGENDHC : HydrocarbonH2 : HydrogenS : Sulfur
LEGENDHC : HydrocarbonH2 : HydrogenS : Sulfur
ObjectiveValue 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
High SulfurDistillate(HC-S)
Hydrocracking Unit
HC-S
HC-S
HC-S
Catalysts
HC-S
HC-S
Desulfurized Hydrocrackate GasolineHC
Sulfur Plant• Agricultural• Pharmaceutical
ElementalSulfur
SS
SSS
H2S S
HC-S
H2
H2H2
H2
Desulfurized Ultra Low Sulfur Jet/DieselHC
H2
H2 H2
H2
H2H2
1300+ PSI;725 to 780 F
H2
Hydrogen UnitH2
H2H2
H2
H2H2
17
Valero System Overview
Aruba
Throughput capacities in thousand barrels per day; Excludes 165,000 bpd Lima, OH refinery
17 Refineries Across Four Key Regions
High-complexity system and leader in conversion capacity
• Enables us to convert more low-quality, discounted feedstocks into high-quality products
Refining system designed for feedstock flexibility
• Increased variety of heavy sour and resid feedstocks from 27 in 2002 to 40 in 2006
Source: Company reports; VLO figures exclude Lima, OH refinery
Gulf Coast 1,720West Coast 305Mid-Con 455Northeast 620Total 3,100
Gulf Coast 1,720West Coast 305Mid-Con 455Northeast 620Total 3,100
3.1 million barrels per day of throughput capacity
• Scale helps mitigate effect of specific outages
Geographically diverse • Valero participates in four key regions
Optimization among regional refining systems
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
VLO XOM COP RD S BP C VX M RO TS O S U N
Cat CrackingHydrocrackingCoking
Conversion Capacity (mbpd)
18
Valero’s Commitment to SafetyContinued commitment to OSHA’s Voluntary Protection Program (VPP)
• VPP is a recognized OSHA program for excellence in safety
• Valero has 11 of only 23 VPP Star Sites in the U.S.
New Process Safety Management (PSM) initiative underway
• Created VP position in Operations to focus efforts on safety
• Achieve best-in-class PSM at all our facilities
20002001200220032004200520062007200820092010
MemphisPort Arthur
ArubaDel CityMcKee
QuebecBenicia
Corpus ChristiSt. Charles
ArdmoreWilmingtonPaulsboro
HoustonKrotz SpringsThree Rivers
Texas City
CertifiedPre-certification Re-certified
Valero’s VPP Schedule
19
Doug ComeauVice President
and General ManagerBenicia Refinery
20
Valero Benicia Refinery
Built by Exxon in 1969 on the site of the former Benicia Army ArsenalSignificant modifications and upgrades have made the refinery one of the most complex and profitable refineries in the United StatesValero acquired the refinery in 2000 and has made additional improvements since that timeValero acquired Huntway Refining Company in 2001
21
Aerial View of Benicia
SOUTHAMPTON
BENICIA INDUSTRIALPARK
CRUDETANKAGE
WWT
BRIDGE
DOCK
BENICIA INDUSTRIES
BENICIA INDUSTRIES
MAIN PROCESSAREA
OLD TOWN
ASPHALT PLANT
22
Recognized as an OSHA VPP Star Site September 2006Total throughput of 170,000 bpdPrimary products include “CARBOB”gasoline, diesel, jet fuel, LPG, fuel oil and asphaltHigh conversion operation
70%+ gasoline yieldLocated on 425 acres with 475 acre buffer zoneStaffed by 480 full-time employees200 continuing service contractors
Benicia Refinery Operations
23
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 feedstocksPrimary utilities used include natural gas, electric power and fresh water
Benicia Feedstocks
24
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)
Benicia Products
25
$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
Benicia Capital Investments
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
27
CARB Phase III Gasoline Model Revisions for 10% Ethanol
Model changes drive increase in ethanol content from 5.7% to 10% by volumeSulfur content must be reduced to accommodate NOx increases from ethanolSulfur reductions require additional hydrotreating of FCC gasolineAromatics change reduces reformate blending and FCC gasoline cut points, which increases need for alkylate and raffinate
5.7%
10%
0%
2%
4%
6%
8%
10%
Phase III Phase III Revised
20
9
0
5
10
15
20
Phase III Phase III Revised
25.0%
22.3%
20%
21%
22%
23%
24%
25%
Phase III Phase III Revised
Increasing Ethanol Content to 10% (volume)
Requires a Reduction in Sulfur (ppm)
And a Reduction in Aromatics (volume)
Depending on refinery configuration, CARB gasoline pool could be reduced by 2% to 4%
net of ethanol
Depending on refinery configuration, CARB gasoline pool could be reduced by 2% to 4%
net of ethanol
28
Appendix
29
Benicia Refinery Flow DiagramAsphalt Plant
11 MBPDCrude
Asphalt
Distillate to HCU
VacuumDistillation10 MBPD
ATBs
Asphalt6 MBPD
PMA
Naphtha to FCC
Gas Oil to FCC
VTBs
RefineryCrude
Distillation
134 MBPD
Naphtha/Distillate
Hydrotreaters55MBPD(2 units)
VacuumDistillation72 MBPD
Light Ends
FCC Feed Hydrotreater
39 MBPD
FCCU72 MBPD
Coker28 MBPD
Dimersol5 MBPD
Alkylation20 MBPD
CatalyticReformer35 MBPD
Hydrocracker36 MBPD
FCCGasoline
Hydrotreater45 MBPD
ATBs
Crude
Off Gas
Naphtha
Jet Fuel/Kero
Fuel Gas
PropaneButane
Gas Oil
Resid
Coke
Gas Oil
LPG
Jet Fuel/Kero
Naphtha
Naphtha
Diesel
Gasoline
P/P
B -B
Slurry
Gasoline
LPG
Low Sulfur Gasoline
Gasoline
LPG
Hydrogen
Gasoline
Propane
Gasoline
Gas OilAsphalt Gas Oil
Gas Oil
Isobutane
RefineryCrude
Distillation
134 MBPD
Naphtha/JetHydrotreaters45.3 MBPD
VacuumDistillation72 MBPD
Light Ends
FCC Feed Hydrotreater
39 MBPD
FCCU72 MBPD
Coker28 MBPD
Dimersol5 MBPD
Alkylation20 MBPD
CatalyticReformer35 MBPD
Hydrocracker36 MBPD
FCCGasoline
Hydrotreater45 MBPD
ATBs
Crude
Off Gas
Naphtha
Jet Fuel/Kero
Diesel
Fuel Gas
PropaneButane
Gas Oil
Resid
Coke
Gas Oil
LPG
Naphtha
Naphtha
Diesel
GasolineNaphtha/Diesel
P/P
B -B
Slurry
Gasoline
LPG
Low Sulfur Gasoline
Gasoline
LPG
Hydrogen
Gasoline
Propane
Gasoline
Gas OilAsphalt Gas Oil
Gas Oil
Isobutane
Asphalt Plant11 MBPD
Crude
Asphalt
Distillate to HCU
VacuumDistillation10 MBPD
ATBs
Asphalt6 MBPD
PMA
Naphtha to FCC
Gas Oil to FCC
VTBs
Asphalt Plant11 MBPD
Crude
Asphalt
Distillate to HCU
VacuumDistillation10 MBPD
ATBs
Asphalt6 MBPD
PMA
Naphtha to FCC
Gas Oil to FCC
VTBs
ULSD16 MBPD
ULSD
30
Map of Valero Refineries
Valero Marketing Presence
Quebec, Canada• 215,000 bpd capacity
Three Rivers, Texas• 100,000 bpd capacity
Corpus Christi, Texas• 340,000 bpd capacity
Wilmington, California• 135,000 bpd capacity
Benicia, California• 170,000 bpd capacity
McKee, Texas• 170,000 bpd capacity
Krotz Springs, Louisiana• 85,000 bpd capacity
Texas City, Texas• 245,000 bpd capacity
Houston, Texas• 130,000 bpd capacity Port Arthur, Texas
• 325,000 bpd capacity
St. Charles, Louisiana• 250,000 bpd capacity
Ardmore, Oklahoma• 90,000 bpd capacity
Memphis, Tennessee• 195,000 bpd capacity
Paulsboro, New Jersey• 195,000 bpd capacity
San Nicholas, Aruba• 275,000 bpd capacity
Delaware City, Delaware• 210,000 bpd capacity
Capacity shown in terms of crude and feedstock throughput
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.
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.
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 largemolecules 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 aremeasures 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.
34
Major Refining Processes – Treating
Definition• Processing of petroleum products to remove some of the sulfur, nitrogen,
heavy metals, and other impuritiesProcess• 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.
35
List of Refining AcronymsAGO – Atmospheric Gas OilATB – Atmospheric Tower BottomsB–B – Butane–Butylene FractionBBLS – BarrelsBPD – Barrels Per DayBTX – Benzene, Toluene, XyleneCARB – California Air Resource BoardCCR – Continuous Catalytic RegeneratorDAO – De–Asphalted OilDCS – Distributed Control SystemsDHT – Diesel HydrotreaterDSU – Desulfurization Unit EPA – Environmental Protection AgencyESP – Electrostatic PrecipitatorFCC – Fluid Catalytic CrackerGDU – Gasoline Desulfurization UnitGHT – Gasoline HydrotreaterGOHT – Gas Oil HydrotreaterGPM – Gallon Per MinuteHAGO – Heavy Atmospheric Gas OilHCU – Hydrocracker UnitHDS – HydrodesulfurizationHDT – HydrotreatingHGO – Heavy Gas OilHOC – Heavy Oil Cracker (FCC)H2 – HydrogenH2S – Hydrogen SulfideHF – Hydroflouric (adic)HVGO – Heavy Vacuum Gas OilkV – Kilovolt
kVA – Kilovolt AmpLCO – Light Cycle OilLGO – Light Gas OilLPG – Liquefied Petroleum GasLSD – Low Sulfur DieselLSR – Light Straight Run (Gasoline)MON – Motor Octane NumberMTBE – Methyl Tertiary–Butyl EtherMW – MegawattNGL – Natural Gas LiquidsNOX – Nitrogen OxidesP–P – Propane–PropylenePSI – Pounds per Square InchRBOB – Reformulated Blendstock for Oxygen Blending RDS – Resid DesulfurizationRFG – Reformulated GasolineRON – Research Octane NumberRVP – Reid Vapor PressureSMR – Steam Methane Reformer (Hydrogen Plant)SOX – Sulfur OxidesSRU – Sulfur Recovery UnitTAME – Tertiary Amyl Methyl EtherTAN – Total Acid NumberULSD – Ultra–low Sulfur DieselVGO – Vacuum Gas OilVOC – Volatile Organic CompoundVPP – Voluntary Protection ProgramVTB – Vacuum Tower BottomsWTI – West Texas IntermediateWWTP – Waste Water Treatment Plant
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 "believe," "expect," "should," "estimates," 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.
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