Valero 2004 Annual Report Download - page 15
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Va l e r o E n e r g y C o r p or a t i o n
s u m m a r y a n n u a l r e p o r t
1 3
Va l e r o E n e r g y C o r p or a t i o n
s u m m a r y a n n u a l r e p o r t
SWEETRETURNSONSOURCRUDE
WhenValeroenteredtherefiningbusinessin
1984,bycommissioningthelastgrassroots
refineryevertobebuiltintheU.S.,itsgoalwasto
takeadvantageoftheenvironmentalmovementand
processcheaper,heaviersourfeedstocksintopremium,
cleaner-burningfuels.
Itprovedtobeawinningstrategy.And,thisadvantage
hasgrownasValerohasgrown!
Today,Valerohasoneofthemostcomplexand
profitablerefiningsystemsinNorthAmerica.
Meanwhile,theheavier,sourcrudefeedstocks,
whichmakeupabout60percentofValero’s
feedstockslate,haveexperiencedrecorddiscounts.
Thesediscountsarelargelytheresultofstrong
worldwidecrudedemand,spurredbyastrong
globaleconomy.And,theincrementalbarrelbeing
producedtomeetthisrisingdemandistypically
heavier,sourcrudeoil,whichmakesitmoresurplus.
Atthesametime,manyrefinersarerelyingon
sweetercrudeoiltomeetincreasinglylowersulfur
specificationsinfuel,whichalsohelpswidenthe
sweet/sourcrudedifferential.
,SeniorVicePresidentofCrude&Feedstock
Supply&Trading,workstoensurethatValero’srefineries
arerunningthemosteconomicalcrudeoilsandfeedstocks.
Thecompany’sstrategyofinvestinginitsrefineriestoenable
themtoprocesssourcrudehasreallypaidoffin2004as
thecompanybenefitedfromrecordsourcrudediscounts.
And,Valerocontinuestocapitalizeonitssuccess
byinvestinginprojectsthatoptimizeitssour
crudestrategy.Forexample,Valero’s$350million
investmentina45,000barrelperdaycokeratits
TexasCityrefinery,increasedtheplant’sabilityto
processheavy,sourMayacrude.Theoriginal
economicsfortheinvestmentwerebasedupon$6
to$7MayadiscountstoWTI,whicharenowmore
than$17!Asaresult,thecokergeneratednearly
$200millioninoperatingincomein2004alone!
Valero’srecentlyacquiredrefineriesinSt.Charles
andArubaalsoprocessMayacrude,andtherecord
discountshelpedtheseassetscontribute$625million
tooperatingincomein2004.
Thecomplexityofitsrefineriesisakeydifference
forValero–allowingittoturnhistoricsourcrude
discountsintosweetreturnsforValero’sshareholders!
$8.06
$3.74
RECORDSOURCRUDEDISCOUNTS
*50/50ARABLIGHT/MEDIUM**ASOFMARCH22,2005