Valero Sees Heavy Turnaround Time, Invests in Capital Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) is coming out of several major refinery turnarounds, which accounts for the company's drop in first-quarter 2017 income, Chief Executive Officer Joe Gorder said Tuesday. Other capital projects, including the company's Diamond Pipeline and Diamond Green diesel plant expansion are progressing well, he said.

Valero reported net income of $305 million for first-quarter 2017, compared with $495 million in first-quarter 2016. The company's Refining Segment reported $647 million of operating income in first-quarter 2017, compared to $915 million in first-quarter 2016. "Our refining team safely executed turnarounds at the Benecia, Texas City, St. Charles and Meraux refineries," said Gorder. "With the bulk of this year's planned maintenance behind us, our refineries should be well positioned to capture available margin opportunities."

"In the first quarter, we invested $661 million in sustaining and growth capital. Construction is progressing on the Diamond Pipeline, with completion expected at the end of this year. Work on the Diamond Green diesel plant expansion ... is continuing as planned," said Gorder in the company's conference call.

Valero's Diamond Pipeline is a joint venture with Plains All American Pipeline LP (NYSE:PAA) (Houston, Texas), which will provide Valero's Memphis Refinery with domestic sweet crude delivered from Cushing, Oklahoma. The project kicked off construction in late 2016 and has a total investment value of approximately $800 million. The roughly 424 miles of pipeline will transport 200,000 barrels per day (BBL/d) of oil. For more information, see Industrial Info's project reports on the Oklahoma, Arkansas and Tennessee portions of the pipeline.

The company's Diamond Green biodiesel plant expansion in Norco, Louisiana, will increase production capacity from 160 million gallons per year to 275 million gallons per year. Construction is planned to kick in the second quarter of this year and will take about a year to complete. Richard Industrial Group (Beaumont, Texas) is acting as design-build firm on the project. For more information, including contact details, see Industrial Info's project report.

Gorder also reported that the company's alkylation unit addition at its refinery in Houston, Texas, was moving ahead as planned. The 13,000-BBL/d alkylation unit will convert butanes and pentanes into alkylates to produce higher-value gasoline blendstock. The project is planned to kick off later this year and be completed in early 2019. For more information, see Industrial Info's project report.

With several major refinery turnarounds behind it and growth projects planned to be wrapped up in the near future, Valero continues to maintain its strength as a key U.S. refiner.

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