Valero Refinery Expansions Pushed Forward by Eagle Ford Production Growth - $730 Million

Valero Refinery Map

Valero plans to build crude topping units at its Corpus Christi, TX refinery and its refinery in Houston.

The two expansions come with a price tag of $730 million, but will likely be needed if the growth of light-sweet crude oil from areas like the Bakken, Eagle Ford, and Permian Basin continue.

Read more: Valero Houston Refinery Expanding for Eagle Ford Crude

The company's plans include adding a 70,000 b/d unit at the Corpus Christi refinery at an estimated cost of $340 million and a 90,000 b/d topping unit in Houston at a cost of $390 million.

Valero announced plans to add the 90,000 b/d unit at its Houston facility at an estimated cost between $220 - $280 million early in 2013. According to Valero Spokesman, Bill Day, those costs are now projected at $390 million for the 90,000 b/d unit.

Eagle Ford Crude Oil Production Driving Refinery Expansions

Eagle Ford Crude has an API of 50 degrees, and Valero's refineries are accustomed to processing heavier crude from South America. As Valero's Eagle Ford production rates remain strong, the need for its refineries to process the light sweet domestic crude is the push behind both of these initiatives.

Additional production growth will likely lead to even more favorable pricing for domestic crude oil.

“The new units at these refineries will allow the plants to purchase less intermediate feedstocks from outside suppliers.”

— Valero Spokesman, Bill Day

Both refinery units are in the planning phase, so no construction has taken place, but the company intends for both units to be completed by the end of 2015.

Other Valero Downstream Projects in Texas

[ic-l]At the Valero's Three Rivers refinery, which sits atop the Eagle Ford shale, the company built a new pre-flash tower and added logistics in 2011-12 to process more light Eagle Ford crude.

Valero also plan expansions at the McKee Refinery in the Texas Panhandle. The project calls for spending $60 million to increase the crude unit from 170,000 bpd to 185,000 bpd, in order to process more Permian Basin crude.

Valero Investing to Handle More Eagle Ford Oil & Other Light Crude

Valero Corpus Christi and Houston Refinery Throughput

Valero Energy plans to increase its light oil processing capacity at its Gulf Coast refineries by adding topping units at Houston and Corpus Christi locations.

The investments will allow the company to process more Eagle Ford oil than possible today.

Valero will add a 90,000 b/d topping unit at its Houston refinery and a 70,000 b/d topping unit at one of the company's Corpus Christi refineries. The company expects returns of greater than 30% (IRRs) for the two investments.

Valero has two plants with total refining capacity of 325,000 b/d in Corpus Christi and the company's Houston refinery has total capacity of 160,000 b/d.

Running lighter crude will help maximize the production of gasoline and diesel.

Valero is also expanding its McKee crude unit in North Texas by 25,000 b/d in 2015 and is evaluating projects at both its Port Arthur and Meraux refineries.

With continued growth in West Texas plays, the Bakken in North Dakota, and the Eagle Ford, refineries will continue making investments to ensure they are processing the maximum volume of lower priced domestic crude.

See the full presentation at valero.com

Valero Houston Refinery Expanding for Eagle Ford Crude

Valero Houston Refinery

Valero plans to boost Eagle Ford refining capability by adding a 90,000 b/d crude topper at its Houston refinery. The 160,000 b/d refinery is set up to refine the typical light, sweet crude, but the topper will allow the facility to process even greater volumes of lighter Eagle Ford Crude. As much as 40% of Eagle Ford crude production is consider condensate and has an API gravity of more than 50 degrees.

The topper will essentially separate components that are too light before they enter the crude unit.

William R. Klesse made the following comment just a few months prior: "So we have quite a study going on, for instance, at Corpus Christi and our Houston Refinery, where at the Houston Refinery we have a very large cat cracker and yet, we don't have a lot of crude capacity. So these are the things that tie to our whole strategy statement that I spoke about earlier where we look at things that continue to, in the essence, lower our overall cost to produce from the womb to the tomb."

The upgrade at the Houston Refinery will allow the company to refine greater volumes of domestic crude, which can be purchased at a lower cost than foreign crude. The upgrade will allow for greater production of gasoline and diesel from the refinery.

This announcement follows Flint Hills Resources' $250 million plan to upgrade its Corpus Christi Refinery. The Flint Hills plan was announced in August of 2012.

Gulf Coast refineries spent years readying for heavier crudes from South America, but the latest boom in domestic production has reversed the trend. Now, refineries like Valero and Flint Hills are preparing to refine more light crude.

Flint Hills Resources Plans $250 Million Refinery Expansion

Flint Hills Resources' West Refinery in Corpus Christi is getting $250 million in upgrades. The improvements will allow the company to process more Eagle Ford crude and reduce emissions. The upgrades wouldn't add capacity, but would allow the company to process more South Texas crude. Flint Hills operates two Corpus Christi refineries. The West Refinery that will be upgraded refines 230,000 barrels of oil per day and the East Refinery refines 70,000 barrels per day. Currently, only 50% of the crude processed in the West Refinery is sourced from the Eagle Ford, but additional processing facilities will allow Flint Hills to maximize the use of local supply. The expansion will not be noticeable to the untrained eye and will add 1,000 jobs at the peak of construction.

“If we receive the final go-ahead and appropriate permits the site will see construction activity for about two years, with as many as 1,000 additional workers on site on many days,” Gaarder added. “However, this project will not require more land nor will new equipment be easily noticed from I-37.” Flint Hills also is establishing a project-specific, near-neighbor panel.

Flint does have to file for permits from both the TCEQ and the EPA before construction can start. Read the full news release at fhr.com

NuStar - Valero Reach Eagle Ford Pipeline Agreements

NuStar Energy and Valero have reached an agreement that will help move South Texas Eagle Ford crude to local refineries. NuStar will convert a current refined products pipeline to crude oil and the line will be used to move oil from Three Rivers to Corpus Christi where Valero has an additional refinery. The company also plans a new 12 inch pipeline that will make the same journey. Valero has indicated it plans to increase the volume of crude the company is taking from the Eagle Ford and this looks to be another step in that direction. 

NuStar Energy L.P. (NYSE: NS) announced today that the company has entered into an agreement with Valero Energy Corporation (NYSE: VLO) in which NuStar will modify existing sections within its South Texas pipeline system and build new sections to transport Eagle Ford and other crude oils. These projects will help improve transportation of crude and condensate to supply its refineries in Three Rivers, Texas and Corpus Christi, Texas.

NuStar will reverse an eight-inch refined products pipeline that currently runs from Corpus Christi to Three Rivers and will convert it to crude oil service. The pipeline will provide capacity to transport Eagle Ford crude and condensate to Valero’s Corpus Christi refinery, and the line is expected to be in full service by the end of September 2011.

NuStar will also build 55 miles of new 12-inch pipeline that will connect to existing pipeline segments to move crude oil from Corpus Christi to Valero’s Three Rivers refinery. This system is expected to be completed and in service by the second quarter of 2012.”

Read the full press release at nustarenergy.com