Valero 2015 Annual Report Download - page 11

Table of Contents
Feedstock Supply
Approximately 59 percent of our current crude oil feedstock requirements are purchased through term contracts while the remaining
requirements are generally purchased on the spot market. Our term supply agreements include arrangements to purchase feedstocks at
market-related prices directly or indirectly from various national oil companies as well as international and U.S. oil companies. The
contracts generally permit the parties to amend the contracts (or terminate them), effective as of the next scheduled renewal date, by
giving the other party proper notice within a prescribed period of time (e.g., 60 days, 6 months) before expiration of the current term.
The majority of the crude oil purchased under our term contracts is purchased at the producer’s official stated price (i.e., the “market”
price established by the seller for all purchasers) and not at a negotiated price specific to us.
Refining Segment Sales
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Our refining segment includes sales of refined products in both the wholesale rack and bulk markets. These sales include refined
products that are manufactured in our refining operations as well as refined products purchased or received on exchange from third
parties. Most of our refineries have access to marine transportation facilities and interconnect with common-carrier pipeline systems,
allowing us to sell products in the U.S., Canada, the U.K., and other countries.
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We market branded and unbranded refined products on a wholesale basis through an extensive rack marketing network. The principal
purchasers of our refined products from terminal truck racks are wholesalers, distributors, retailers, and truck-delivered end users
throughout the U.S., Canada, the U.K., and Ireland.
The majority of our rack volume is sold through unbranded channels. The remainder is sold to distributors and dealers that are members
of the Valero-brand family that operate approximately 5,700 branded sites in the U.S. and the Caribbean, approximately 1,000 branded
sites in the U.K. and Ireland, and approximately 800 branded sites in Canada. These sites are independently owned and are supplied by
us under multi-year contracts. For wholesale branded sites, we promote the Valero ®, Beacon®, Diamond Shamrock®, and Shamrock®
brands in the U.S. and the Caribbean, the Texaco® brand in the U.K. and Ireland, and we license the Ultramar® brand in Canada.
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We sell a significant portion of our gasoline and distillate production through bulk sales channels in U.S. and international markets. Our
bulk sales are made to various oil companies and traders as well as certain bulk end-users such as railroads, airlines, and utilities. Our
bulk sales are transported primarily by pipeline, barges, and tankers to major tank farms and trading hubs.
We also enter into refined product exchange and purchase agreements. These agreements help minimize transportation costs, optimize
refinery utilization, balance refined product availability, broaden geographic distribution, and provide access to markets not connected
to our refined-product pipeline systems. Exchange agreements provide for the delivery of refined products by us to unaffiliated
companies at our and third-parties’ terminals in exchange for delivery of a similar amount of refined products to us by these unaffiliated
companies at specified locations. Purchase agreements involve our purchase of refined products from third parties with delivery
occurring at specified locations.
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