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

January 31, 2014 Kirk Eggleston

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.

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 Files To Create a Logistics MLP - Valero Energy Partners

September 27, 2013 R.T. Dukes

Valero has filed a registration statement with the SEC for the initial public offering of Valero Energy Partners (VLP).

VLP will serve as a vehicle for dropping down (selling) logistics assets from Valero. Logistics assets include everything that helps Valero delivery quality crude to its refineries: pipelines, rail cars, rail unloading, barges, ships, docks, tanks, etc.

Logistics MLPs trade at 10-15 times EBITDA (earnings before interest, taxes, depreciation, and amortization), while refineries trade at just 3-5 times EBITDA. That alone provides for incentive to spin off the assets to create value. Add the fact that more than 40% of Valero's investments are in logistics assets and its easy to see why VLP could easily be a stand along company.

Eagle Ford assets will likely be included in the initial transaction:

Valero Energy Partners LP expects its initial assets to include crude oil and refined petroleum products pipeline and terminal systems in the Gulf Coast and Mid-Continent regions of the United States that are integral to the operations of Valero's refinery located in Port Arthur, Texas, its McKee refinery located in Sunray, Texas, and its refinery located in Memphis, Tennessee.

Before the company can go public, the Valero board will need to approve the spin off and a management team will need to be assembled.

Port of Corpus Christi Has Barges Waiting To Move Eagle Ford Oil

June 26, 2013 R.T. Dukes

Trafigura Terminals Eagle Ford Port in Corpus Christi

The Port of Corpus Christi has gone from moving less than 10,000 b/d of crude oil in 2011 to approximately 200,000 b/d in August 2012 to almost 350,000 b/d now.

Ships are now standing in line to move Eagle Ford crude and port expansions simply won't come fast enough.

“The longest [wait] I’ve seen is about seven days,” Ray Harrison, the port’s assistant harbor master said last Friday.

There are several construction projects underway or in the works

A new dock that can handle two 30,000 barrel barges will be in service this month
A new public dock has been approved that can handle four 30,000 barrel barges
Two other private projects on port land are being designed to load ships with 500,000 barrel capacity
Trafigura Terminals is expanding and will be able to handle three medium-range tankers and two inland barges at the same time

As noted by RBN Energy, approximately 30% of the oil shipped out of the port is headed for Morgan City, almost 30% is headed for Houston, another ~10% Beaumont, and ~10% to Texas City. The rest is sent to various locations throughout Texas and Louisiana.

There have been several stories on the port in the past few days. You can read more at platts.com,rbnenergy.com, and at learn more about Trafigura's terminal at texdockrail.com

Valero's Quebec Refinery Processing Eagle Ford Barrels "Very Well"

June 20, 2013 R.T. Dukes

It's no secret that Canada is importing more and more U.S. oil. Some of that is coming from the Eagle Ford.

In the first quarter of 2013, the U.S. sent almost 100,000 b/d to refineries in Canada. The reality is the U.S. is much close and can supply oil at more competitive rates than places like western Africa.

San Antonio based Valero has a 235,000 b/d refinery in Quebec and as of May had sent one shipment to test how well the refinery can process Eagle Ford barrels. Results were positive, so its likely more crude will be heading north.

“The test proved the refinery could process Eagle Ford barrels.”

— Day

It's really pretty amazing what has happened. Gulf Coast refineries have been preparing to take heavy crude, like those produced in Canada, and Canadian refineries are better suited for light crudes, like those produced in Texas.

Valero plans to start shipping Eagle Ford crude to its Quebec refinery on a more consistent basis in the second half of 2013.

La Salle County Refinery Planned Near Gardendale

May 20, 2013 R.T. Dukes

Worldwide Energy Consortium is planning a refinery in La Salle County near Gardendale. Significant volumes of oil pass through the Gardendale Rail system and through Plains All American Pipeline's gathering system.

The Whitetail Refinery will be built to take advantage of growing Eagle Ford production in the area. The refinery is in the permitting and engineering phase, but the company expects it will be operational by the fourth quarter of 2014. That's fast moving for a refinery.

“The rapid deployment of modern, cost efficient refining operations directly into the new production regions will positively impact the producers, consumers, and the investors in our projects.”

— Dave Martinelli, CEO Worldwide Energy Consortium, Inc.

Read the full press release at worldecorp.com