Valero 2010 Annual Report Download - page 13

11HIGHGRADING OUR SYSTEM
The St. Charles project is expected to provide more
than 5 percent higher yield through the FCC, and
improve energy eciency with a new power recovery
turbine. It should double the exibility to process
lower-priced residual feedstocks, backing out
higher-priced vacuum gas oil. In all, the project is
estimated to produce $130 million in annual operating
income before D&A.
The large hydrocracker projects at Port Arthur and
St. Charles, due for completion during the second half
of 2012, should create high-value products from
low-cost feedstocks plus hydrogen sourced from
relatively inexpensive natural gas. Both will be
50,000 barrel-per-day hydrocrackers, and the Port
Arthur project additionally will include facilities that
are projected to process more than 150,000 barrels per
day of high-acid, heavy sour Canadian crude. The units
should generate liquid volume expansions of
25 percent to 30 percent.
The main products will be high-quality diesel and
jet fuel to meet growing global demand for middle
distillates. The projects together are projected to yield
a total estimated annual operating income before D&A
of nearly $1.4 billion.
The hydrogen plant projects at Memphis and McKee
should reduce the cost of hydrogen by about
one-third, by using cheaper natural gas instead
of more expensive crude oil, when completed in
early 2012. The Memphis project also includes the
conversion of a distillate hydrotreater to a mild
hydrocracker. The two projects represent a total
investment of about $180 million, and estimated
annual operating income before D&A of $160 million.
The new Lévis to Montreal products pipeline will
have an initial throughput capacity of 100,000 barrels
per day, and will allow Valero to place more products
into the Montreal and Ontario markets. This total
investment of about $370 million is expected to bring
an estimated $55 million in annual operating income
before D&A, with completion expected in late 2012.
Valero pursues acquisitions that enhance its portfolio
and promise long-term prot growth. We recently
announced an agreement to acquire Chevron’s
Pembroke renery in Wales, as well as marketing and
logistics assets through the United Kingdom and
Ireland, for $730 million, excluding working capital.
We expect to close during third quarter 2011.
The addition of the Pembroke renery – which Valero
will purchase for about 14 percent of its estimated
replacement cost – will mark an important entry into
the European markets. The Pembroke plant is one of
Western Europe’s largest and most complex reneries,
with a total throughput capacity of 270,000 barrels
per day. The renery has a low cash operating
cost-per-barrel, making it a competitive addition to our
portfolio.
In addition to the renery, we also will acquire
ownership interests in four major pipelines and 11 fuel
terminals, a 14,000 barrel-per-day fuels business and a
network of more than 1,000 Texaco-branded wholesale
sites.
Valero will continue to invest in operations and
consider acquisitions that boost protability for
sustained, long-term growth.