Valero focuses on diesel production and expanding refining footprint

26 October 2010 21:16  [Source: ICIS news]

HOUSTON (ICIS)--US refiner Valero expects newly installed hydrocrackers will help the company meet rising demand for diesel as the global economy continues to recover, executives said on Tuesday.

The company plans to finish installing the hydrocrackers at the Port Arthur refinery in Texas and the St Charles refinery in Louisiana, executives said during an earnings conference call. This would help the company increase diesel production.

Valero said that 81% of its refining output is diesel, gasoline and jet fuel.

The refiner expects demand to increase as the economy continues recovering. As of Monday, the margin for diesel was $12.19/bbl while gasoline was $4.73/bbl.

The company has exported large volumes of diesel to Germany, France and South America, each of which have shown strong demand. All product exports have been strong with an third-quarter average of 65,000 bbl/day of gasoline exports and 165,000 bbl/day of exports of distillates, such as diesel, heating oil and jet fuel.

Valero expects export volumes will remain up as global fuel demand been growing faster than that in the US.

Valero said specifically that there have been supply issues in Venezuela and Mexico. In addition, Brazil, with its growing economy, has been importing 200,000 bbl/day of distillate.

Valero executives said temporary issues, such as the recent strikes in French, ultimately will not have a major impact on the market.

Executives said they would keep an eye on diesel demand and margins to see if this has been a sign of economic recovery or the upcoming holiday season.

In other news, Valero is involved in the expansion of the Keystone Pipeline, led by TransCanada, to bring Canadian crude oil to hubs in the midwest. The second phase of the project will be a link from Cushing to Port Arthur, Texas.

This is tied to Valero’s capitol investment in Port Arthur. Government permitting has slowed down the progress of pipeline construction, pushing the completion date of the project back to the second quarter of 2013 instead of 2012.

By the second quarter of 2012, the link from Cushing to Port Arthur will be complete and capable of bringing heavy sour crude from Canada to Valero’s refinery in Port Arthur.

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By: Sheena Martin
+1 713 525 2653

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