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Released July 29, 2022 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Refiner and alternative fuels producer Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) quadrupled year-over-year refining margins in the recently completed second quarter of 2022, setting the company up for reported quarterly income of $4.7 billion, compared with $162 million in the second quarter of 2021. Valero reported a second-quarter refining margin of $8.09 billion, compared with $2.05 billion in the prior-year quarter. The company's Refining segment shown the brightest of the company's three operating segments during the quarter, with Ethanol and Renewable Diesel segments' incomes lagging behind.
In a Thursday earnings conference call, Valero Chief Executive Officer Joe Gorder discussed the company's results and the progress Valero is making on its capital projects. "Our refinery utilization rate increased from the pandemic low of 74% in the second quarter of 2020 to 94% in the second quarter of 2022. Refining margins in the second quarter were supported by continued strength in product demand coupled with low product inventories and continued energy cost advantage for U.S. refineries compared to global competitors," said Gorder.
Gorder noted that refined product production was constrained because of significant capacity rationalization brought about by the COVID-19 pandemic, which resulted in refinery closures and conversions to lower-carbon fuels. "In addition, the Russia-Ukraine conflict intensified the supply tightness, with less Russian products in the global market," he said.
Valero is poised to take advantage of this high-demand, low-supply situation in the future with its capital projects, while also trying to achieve lower-carbon goals. "On the strategic front, we remain on track with our growth projects that reduce cost and improve margin capture," said Gorder. Examples include the addition of a delayed coker unit at the company's refinery in Port Arthur, Texas, which is expected to increase the refinery's throughput capacity and improve turnaround efficiency. Construction on the 55,000-barrel-per-day (BBL/d) unit kicked off in 2019 and is expected to be completed next year. Subscribers to Industrial Info's Global Market Intelligence (GMI) Refining Project Database can click here for the detailed report. A sulfur recovery unit also is being constructed at the refinery to support the delayed coker. Subscribers can click here for the report.
Next to the Port Arthur Refinery, Valero is constructing a renewable diesel unit for its Diamond Green Diesel (DGD) joint venture. The project, known as DGD 3, is expected to be operational in the fourth quarter of this year. Gorder said, "The completion of this 470 million-gallon-per-year plant is expected to double DGD's total annual capacity to approximately 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha." Subscribers to Industrial Info's Alternative Fuels Project Database can click here for the report.
Not only is Valero producing lower-carbon fuels in its Renewable Diesel and Ethanol segments, but also striving for a lower-carbon footprint through others' projects--notably Navigator Energy Services LLC (Dallas, Texas) and BlackRock Incorporated's (NYSE:BLK) (New York, New York) plans for a carbon capture and sequestration (CCS) project in the U.S. Midwest. The project consists of a network of interstate pipelines leading to a sequestration site in Illinois.
Gorder said, "BlackRock and Navigator's carbon sequestration project is progressing on schedule and is expected to begin startup activities in late 2024. We are expected to be the anchor shipper, with eight of our ethanol plants connected to this system, which should provide a lower carbon-intensity ethanol product and generate higher product margins." Subscribers to Industrial Info's Pipelines and Terminals Project Databases can click here for related project reports.
And Valero may not be stopping there in regard to carbon reduction. "We continue to evaluate other low-carbon opportunities," said Gorder, "such as sustainable aviation fuel, renewable hydrogen, and additional renewable naphtha and carbon sequestration projects."
Valero's Refining segment reported operating income of $6.2 billion in the just-passed quarter, compared to $349 million in the prior year. Refining throughput volumes averaged 3 million BBL/d, which was 127,000 BBL/d higher than second-quarter 2021.
The company's Renewable Diesel segment reported $153 million of operating income in the quarter, compared with $248 million for second-quarter 2021. The drop in operating income comes despite higher sales volumes, which averaged 2.2 million gallons per day in second-quarter 2022, which was 1.3 million gallons per day higher than the prior-year quarter. The higher sales volumes are attributable to the completion of the DGD 2 renewable diesel project in Louisiana, which started up in fourth-quarter 2021.
Valero's Ethanol segment reported operating income of $101 million, which was basically flat with the $99 million reported in the prior year. The company's ethanol production averaged 3.9 million gallons per day in second-quarter 2022.
Subscribers can click here for a look at all of the projects mentioned in this article, and here for the plant profiles.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
In a Thursday earnings conference call, Valero Chief Executive Officer Joe Gorder discussed the company's results and the progress Valero is making on its capital projects. "Our refinery utilization rate increased from the pandemic low of 74% in the second quarter of 2020 to 94% in the second quarter of 2022. Refining margins in the second quarter were supported by continued strength in product demand coupled with low product inventories and continued energy cost advantage for U.S. refineries compared to global competitors," said Gorder.
Gorder noted that refined product production was constrained because of significant capacity rationalization brought about by the COVID-19 pandemic, which resulted in refinery closures and conversions to lower-carbon fuels. "In addition, the Russia-Ukraine conflict intensified the supply tightness, with less Russian products in the global market," he said.
Valero is poised to take advantage of this high-demand, low-supply situation in the future with its capital projects, while also trying to achieve lower-carbon goals. "On the strategic front, we remain on track with our growth projects that reduce cost and improve margin capture," said Gorder. Examples include the addition of a delayed coker unit at the company's refinery in Port Arthur, Texas, which is expected to increase the refinery's throughput capacity and improve turnaround efficiency. Construction on the 55,000-barrel-per-day (BBL/d) unit kicked off in 2019 and is expected to be completed next year. Subscribers to Industrial Info's Global Market Intelligence (GMI) Refining Project Database can click here for the detailed report. A sulfur recovery unit also is being constructed at the refinery to support the delayed coker. Subscribers can click here for the report.
Next to the Port Arthur Refinery, Valero is constructing a renewable diesel unit for its Diamond Green Diesel (DGD) joint venture. The project, known as DGD 3, is expected to be operational in the fourth quarter of this year. Gorder said, "The completion of this 470 million-gallon-per-year plant is expected to double DGD's total annual capacity to approximately 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha." Subscribers to Industrial Info's Alternative Fuels Project Database can click here for the report.
Not only is Valero producing lower-carbon fuels in its Renewable Diesel and Ethanol segments, but also striving for a lower-carbon footprint through others' projects--notably Navigator Energy Services LLC (Dallas, Texas) and BlackRock Incorporated's (NYSE:BLK) (New York, New York) plans for a carbon capture and sequestration (CCS) project in the U.S. Midwest. The project consists of a network of interstate pipelines leading to a sequestration site in Illinois.
Gorder said, "BlackRock and Navigator's carbon sequestration project is progressing on schedule and is expected to begin startup activities in late 2024. We are expected to be the anchor shipper, with eight of our ethanol plants connected to this system, which should provide a lower carbon-intensity ethanol product and generate higher product margins." Subscribers to Industrial Info's Pipelines and Terminals Project Databases can click here for related project reports.
And Valero may not be stopping there in regard to carbon reduction. "We continue to evaluate other low-carbon opportunities," said Gorder, "such as sustainable aviation fuel, renewable hydrogen, and additional renewable naphtha and carbon sequestration projects."
Valero's Refining segment reported operating income of $6.2 billion in the just-passed quarter, compared to $349 million in the prior year. Refining throughput volumes averaged 3 million BBL/d, which was 127,000 BBL/d higher than second-quarter 2021.
The company's Renewable Diesel segment reported $153 million of operating income in the quarter, compared with $248 million for second-quarter 2021. The drop in operating income comes despite higher sales volumes, which averaged 2.2 million gallons per day in second-quarter 2022, which was 1.3 million gallons per day higher than the prior-year quarter. The higher sales volumes are attributable to the completion of the DGD 2 renewable diesel project in Louisiana, which started up in fourth-quarter 2021.
Valero's Ethanol segment reported operating income of $101 million, which was basically flat with the $99 million reported in the prior year. The company's ethanol production averaged 3.9 million gallons per day in second-quarter 2022.
Subscribers can click here for a look at all of the projects mentioned in this article, and here for the plant profiles.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
