Valero Focuses on Refinery Growth in Texas, Louisiana

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Researched by Industrial Info Resources (Sugar Land, Texas)--Petroleum refining giant Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) has two major Houston, Texas projects in the works, with one set for startup in the second quarter of this year. Industrial Info is currently tracking 85 Valero projects worth $2.58 billion.

Mentioned during the company's first-quarter earnings conference call, a Houston crude topper unit addition will be complete next month, after having kicked off in October 2014. This $400 million project includes the construction of a 90,000 barrel-per-day (BBL/d) crude unit at an existing 95,000 BBL/d crude oil refinery for the purpose of processing additional West Texas Intermediate (WTI), Eagle Ford Shale and Bakken crude.

Another project in the Bayou City is a $300 million hydrofluoric (HF) alkylation unit addition. Approved in January and now going through engineering and procurement, the company said during the conference call, the project is slated for completion in January 2019. The 13,000 BBL/d unit will convert natural gas liquids (NGL) to alkylates to produce a higher-value gasoline blendstock.

These two Houston projects reflect Valero's focus on refining growth. Another project that reflects this grown is a Corpus Christi, Texas crude unit completed in late 2015 after kicking off in May 2014. The $350 million crude topper unit addition at the Bill Greehey Refinery--West plant included the construction of a 70,000 BBL/d unit to process additional Eagle Ford Shale Crude.

"With respect to our refining growth strategy, the new Corpus Christi crude unit, which was completed late last year, operated as planned and delivered approximately $35 million of EBITDA [earnings before interest, tax, depreciation and amortization] in the first quarter," said John Locke, vice president of investor relations.

Another recently completed project is the $160 million St. Charles hydrocracker unit expansion in Norco, Louisiana. This project was set up to boost capacity of a 57,000 BBL/d high pressure VGO (vacuum gas oil) hydrocracker to 75,000 BBL/d. The expansion was completed in March of this year.

Company executives said they plan to invest in midstream activities in the future along with refining. "Midstream investments are of interest," said Chief Executive Officer Joseph W. Gorder. "They've got a lower hurdle rate, as you would expect, but they will drive earnings growth through optimization, so these are critical to us also."

Valero's net results for the first quarter was $495 million compared with $964 million for the same period of last year.

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