Valero 2006 Annual Report Download - page 11

VA L E R O E N E R G Y C O R P OR AT I O N 9
Making Valero
A Global Force in Refining
Realizing that the time was right to
enter the refining business, Valero
in 1997 began buying undervalued
refineries and investing to expand and
improve them. A decade later, Valero
has assembled an 18-refinery system
that’s the largest in North America in
terms of throughput capacity.
Valero bought its plants at a fraction
of their replacement cost as other
companies were abandoning the
refining business at a cyclical low. As
the years went by, Valero’s strategy of
acquiring plants at value prices was
proven correct as margins surged and
analysts declared a “Golden Age of
Refining.” And now, with its size and
geographic diversity, Valero is a vibrant
competitor on an international scale.
By investing in and upgrading its
refineries since 1980, Valero has
added 573,000 barrels per day (BPD)
in refining capacity – an amount
nearly twice the capacity of Valero’s
Port Arthur refinery, one of the largest
in its system.
When other refiners scrambled to
add capacity to take advantage of this
1,000
800
1,200
1,400
1,600
1,800
600
400
200
0
MBPD
VLO XOM COP RDS BP CVX MRO SUN TSO
Cat Cracking
Hydrocracking
Coking
A Leader in Upgrading Capacity
Valero’s upgrading capacity, which is the highest in its peer group, provides
superior operational flexibility. Note: Includes U.S., Canada & Caribbean
Source: Oil & Gas Journal, Company Web Sites
“Golden Age,” Valero was uniquely
positioned to carefully choose which
projects best fit its strategy and
provided the highest returns. In 2006,
as construction costs skyrocketed
Another advantage of Valero’s strategy
is the expertise it has gained along with
the refineries. By applying this
expertise in conjunction with upgrades,
expansions, energy efficiency and
reliability enhancements, Valero is
targeting $1 billion of operating income
improvements in the next five years.
Valero’s strategy continues to pay off.
Current capital improvement projects
are expected to add another
$250 million in operating income
in 2007. This includes the recently
completed expansion at the Port
Arthur refinery and mild hydrocracker
units in the works at the Houston and
St. Charles refineries. In addition,
grassroots ultra-low-sulfur diesel units
are planned for the Benicia and Corpus
Christi refineries.
A successful strategy plus world-
class size, complexity, strength and
geographic diversity – combined with
Valero’s dedicated and hard-working
employees – give Valero the best
refining system in the business. It’s a
system that is positioned for long-term
success.
across the global refining industry,
Valero was able to implement its most
ambitious capital budget ever, while
still keeping costs at approximately
$3.75 billion.
The company
has acquired the
best employees
and developed
the best practices
in the industry,
providing significant
opportunities to
improve annual
operating income.