Corpus Christi Refinery Tour November 21, 2013
Safe Harbor Statement Statements contained in this presentation that state the Company s or management s expectations or predictions of the future are forward looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words believe, expect, should, estimates, and other similar expressions identify forward looking statements. It is important to note that actual results could differ materially from those projected in such forward looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero s annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission, and available on Valero s website at www.valero.com. 2
Karen Ngo Investor Relations Manager 3
Agenda Crude oil overview Refining basics Refinery optimization Market fundamentals & impacts on refinery optimization 4
Crude Oil Characteristics Crude oils are blends of hydrocarbon molecules Classified and priced by density, sulfur content, and acidity Density is commonly measured in API gravity Measure of crude density relative to the density of water API > 10: lighter, floats on water API < 10: heavier, sinks in water Sulfur content is measured in weight percent Less than 0.7% sulfur content = sweet Greater than 0.7% sulfur content = sour Acidity is measured by Total Acid Number (TAN) High acid crudes are those with TAN greater than 0.7 Acidic crudes are corrosive to refinery equipment, require greater investment to process significant volumes or higher TAN levels In general, higher API crudes have lower sulfur and are easier to process. Lower API crudes have higher sulfur and require additional downstream processing to produce fuels that meet regulatory specs. Heavier, higher sulfur, more acidic crudes tend to trade at discounts relative to the light, sweet, low TAN benchmarks WTI, Brent, or LLS (unless logistically constrained) 5
SWEET SULFUR CONTENT SOUR Crude Oil Basics 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Cold Lake Cerro Negro Maya WCS M-100 (resid) Crude Oil Quality by Types Napo Iran Heavy Ameriven- Hamaca Alaskan North Slope Arab Heavy Arab Medium Dubai Mars Arab Light Urals Eagle Ford 0.5% Brent WTI LLS and Bakken Cabinda Bonny Light 0.0% Tapis 15 20 25 30 35 40 45 50 HEAVY API GRAVITY LIGHT Source: Industry reports High Acid (Sweet) Estimated Quality of Reserves (2012) 3% Sweet 23% Heavy Sour 18% Source: DOE, Oil & Gas Journal, Company Information Light/Medium Sour 56% Majority of global crude oil reserves are sour Most quoted benchmark prices are light sweet crude oils WTI (West Texas Intermediate), Western Hemisphere Brent (North Sea), Atlantic Basin/Europe Tapis/Oman (Middle East), Asia Pacific 6
What s in a Barrel of Crude Oil? Crude Oil Types Characteristics Inherent Yields Light Sweet (e.g. WTI, LLS, Brent) Medium Sour (e.g. Mars, Arab Light, Arab Medium, Urals) Heavy Sour (e.g. Maya, Cerro Negro, Cold Lake, Western Canadian Select) > 34 API Gravity < 0.7 % Sulfur 35% Demand Most Expensive 24 to 34 API Gravity > 0.7 % Sulfur 50% Demand Less Expensive < 24 API Gravity > 0.7 % Sulfur 15% Demand Least Expensive 3% 32% 30% 35% 2% 24% 26% 48% 1% 15% 21% 63% 2012 U.S. Refinery Production 8% 8% 45% Propane/ Refinery Butane Gases Gasoline RBOB CBOB Conventional CARB Premium 39% Distillate Jet Fuel Diesel Heating Oil 8% Heavy Fuel Oil & Other Source: EIA refinery yield update Sep 27, 2013 Refineries upgrade crude oil into higher value gasoline and distillates 7
Basic Refining Concepts Intermediates Final Products < 90 F C1 to C4 Propane, Butane and lighter Refinery fuel gas Propane NGLs Crude oil 90 220 F C5 to C8 Straight Run Gasoline (low octane) More processing Gasoline (high octane) Distillation Tower (Crude Unit) 220 315 F C8 to C12 315 450 F C12 to C30 Naphtha Kerosene More processing More processing Gasoline (high octane) Jet fuel Kerosene Jet fuel Diesel Fuel oil Furnace 450 650 F C30 to C50+ Light Gas Oil More processing Gasoline (high octane) Diesel Fuel oil Vacuum Unit 650 800 F C30 to C50+ 800+ F C50 to C100+ Heavy Gas Oil Residual Fuel Oil/Asphalt More processing More processing Gasoline (high octane) Diesel Fuel oil Gasoline (high octane) Diesel Fuel oil Lube stocks 8
Distillation Tower Hydroskimming/Topping Refinery 4% Propane/ Butane Light Sweet Crude Low Octane Gasoline and Naphtha LS Kerosene/Jet Fuel 32% Gasoline RBOB CBOB Conventional CARB Premium 32% Distillate Jet Fuel Diesel Heating Oil 32% Heavy Fuel Oil & Other Low complexity refineries run sweet crude 9
Distillation Tower Medium Conversion: Catalytic Cracking 8% Propane/ Butane Light/ Med Sour Crude Low Octane Gasoline and Naphtha LS Kerosene/Jet Fuel LS Diesel/Heating Oil 43% Gasoline RBOB CBOB Conventional CARB Premium 30% Distillate Jet Fuel Diesel Heating Oil 19% Heavy Fuel Oil & Other Moderate complexity refineries tend to run more sour crudes, yield more high value products, and achieve higher volume gain 10
Distillation Tower High Conversion: Coking/Resid Destruction 6% Propane/ Butane Medium/ Heavy Sour Crude Low Octane Gasoline and Naphtha HS Kerosene/Jet Fuel HS Diesel/Heating Oil High Octane Gasoline LS Kerosene/Jet Fuel LS Diesel/Heating Oil 47% Gasoline RBOB CBOB Conventional CARB Premium 33% Distillate Jet Fuel Diesel Heating Oil 14% Heavy Fuel Oil & Other High complexity refineries can run heavier, more sour crudes while achieving the highest light product yields and volume gain 11
Hydrocracking Basics Objective Upgrade high sulfur vacuum gasoil to low sulfur light products (diesel, jet, and gasoline) 20% to 30% volume expansion due to hydrogen saturation Favorable economics, especially when cheap natural gas is used to produce hydrogen Hydrocracking Unit HC Desulfurized Hydrocrackate Gasoline High Sulfur VGO (HC-S) HC-S HC-S H2 H2 HC-S H2 Catalysts H2 H2 H2 H2 H2 HC-S HC-S H2 H2 HC-S HC H2S Desulfurized Ultra Low Sulfur Jet/Diesel Sulfur Plant S S S S S Elemental Sulfur S Agricultural Pharmaceutical Hydrogen Unit H2 H2 H2 H2 H2 H2 1300+ PSI; 725 F to 780 F LEGEND HC : Hydrocarbon H2 : Hydrogen S : Sulfur New VGO hydrocrackers at Port Arthur and St. Charles provide ~20% liquid volume gain or ~24,000 BPD of additional high value products when both HCUs are at full unit capacity 12
How Do You Maximize Refinery Profit? Feedstocks (100+) Products (30+) Prices Qualities Availabilities (purchase volumes) Refinery Prices Specifications Market demand (sales volumes) 10 25+ individual process units Process unit hardware constraints Operating parameters (severity/conversion, cutpoints, stream disposition) Operating costs (energy, catalysts, process chemicals) Relationship between variables modeled in series of linear equations Linear program used to find combination of feed and product slates, operating rates and parameters that delivers highest profit 13
Growth of North American Crude Production Is Changing How Refineries Are Optimized Growing supply of domestic light sweet crude is outpacing demand closest to areas where the crude is produced Crude oil is being transported by pipelines and rail to coastal refineries Length in the USGC is leading to structural discounts for light sweet crudes and incentivizing refiners to process incremental volumes 1. Back out foreign imports from existing light sweet capacity 2. Fill previously uneconomic light sweet capacity 3. Displace heavier crude oil from the feed slate 4. Pursue projects that relieve constraints for processing light sweet crudes Refinery configuration plays a large part in determining the suitability of crudes and feedstocks Yield profile for cost-advantaged feed slate may fall outside bounds of refinery s design limits Difficult to achieve maximum rates and maximum profit optimize LP models are used to make crude and feedstock selection decisions based on the relative economics of the available options 14
Key Constraints to Processing Light Crude Each refinery is designed to process a specific range of feedstocks Otherwise construction costs would be prohibitively high When feeds that fall outside of that range are processed, constraints are hit before the design capacity Constraints may occur in the crude unit or in downstream units Examples include: Distillation tower has insufficient capacity for light components Hydraulic capacity of overhead distillation hardware Furnace or heat exchanger design limits turndown flexibility or ability to cool and condense higher volume of light ends Saturated gas plant has insufficient capacity to process additional volume Downstream processing capacity limits ability to convert intermediates into finished products Depending on the constraint, solutions can range from $10 million to hundreds of millions and can take months to years to implement 15
Issues with Processing Light Crudes Intermediates Final Products < 90 F C1 to C4 Propane, Butane and lighter Refinery fuel gas Propane NGLs Distillation Tower (Crude Unit) 90 220 F C5 to C8 220 315 F C8 to C12 Straight Run Gasoline (low octane) Naphtha More processing More processing Gasoline (high octane) Gasoline (high octane) Jet fuel Light crudes contain significantly more naphtha and lighter components Bottleneck at top of crude distillation tower or in downstream naphtha and light ends processing units Disposition for incremental straight run gasoline and naphtha production Crudes are not all created equal. Be careful about generalizing crude oil properties and their impact on product yields. Some light crudes are inherently diesel-rich or gasoline-rich despite having a similar API gravities As VLO s diet shifted to higher API domestic shale crudes (Eagle Ford, Bakken), distillate yields have stayed about the same 16
Valero s Growth in Processing Volumes of Cost-Advantaged U.S. and Canadian Crude MBPD 900 800 700 600 500 400 300 200 100 MBPD Quebec West Coast Region 1,600 Mid-Con. Region Gulf Coast Region VLO Other Crude Runs (right axis) 1,400 1,200 1,000 800 600 400 200 0 2010 2011 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Note: Other crude runs excludes Pembroke Refinery 0 17
Dennis Payne Vice President and General Manager Corpus Christi Refinery 18
Valero Corpus Christi Overview Aerial View of Refinery West Plant East Plant Quintana Administration Building East Plant 19
Valero Corpus Christi Refinery Overview 1980 Valero Buys 50% Interest in Saber Refinery Refinery Consists of a Crude Unit, Vacuum Unit, and Tankage Refinery Start-up 1975 1983 HOC Start-Up Refinery Evolution 1990 1991 Hydrocracker, NHT & CCR Reformer Projects 2001 Acquisition of El Paso Refinery (East Plant) 9 1980 1985 1990 1995 2000 2005 2010 2011 2012 2005 New Administration Building & East Plant Control Room Dedicated as the Bill Greehey Refinery 2009 Alkylation Upgrade (West Plant) East Plant FCC/Alky Idled 1982-1983 Refinery Upgrade Project Valero Becomes 100% Owner Saber Energy, Inc. Valero (West Plant) Valero (East & West Plants) 1988 HOC Expansion 1992-1993 Butane Upgrade Project (Including Butamer, MTBE, & Oleflex Units) 1994 Marine Vapor Recovery Project 2003-2004 Gasoline Desulfurizati on Unit East & West Refinery Integration Projects 2006-2007 MTBE Conversion to Iso- Octene New ULSD and SMR Units 2010-2011 Ethanol and Biodiesel Blending 2012 Increased supply of Eagle Ford to refinery 20
Valero Corpus Christi Overview West Plant acquired from Saber Energy in 1980; First Valero owned refinery Last grass-roots refinery built in the United States termed Refinery of the Future in 1983 One of the world s most sophisticated and technologically advanced refinery First refinery to win the Texas Governor s Award for Environmental Excellence East Plant acquired from El Paso Corp in 2001, adding 115,000 BPD capacity Current combined refinery throughput capacity of 325,000 BPD located on 523 acres Since 1983, refinery throughput has tripled 21
Valero Corpus Christi Overview Refinery Highlights Produces gasoline for domestic (CBOB and RBOB) and export use, ultra low sulfur diesel, jet fuel, petrochemicals, propane, butane, asphalt, and petroleum coke Crude and product movements by pipeline, eight bay truck rack, and nearly 4,700 feet of ship channel access 5 ship docks and 5 barge docks Occupational Safety and Health Administration (OSHA) Voluntary Protection Program (VPP) Star Sites since 2005, a prestigious recognition for excellent workplace programs Solomon 1 st quartile in key areas such as operating expense, maintenance index, mechanical availability, energy intensity, and personnel index Employs 782 employees and 442 contractors 22
Corpus Christi Feedstocks and Products Slate 2013 YTD Feedstocks (bbl/day) Crude Oil 131,000 Sour 58% Sweet 42% Resid/Heavy Feed 80,000 LPGs/Gasoline Blend Stocks 35,000 Other Feed 17,000 Total Feed 263,000* Products (bbl/day) Petrochemicals 19,000 Gasoline 121,000 Gasoline Blendstocks 25,000 Jet Fuel 13,000 USLD 48,000 Asphalt 12,000 Other 23,000 Total Liquid Products 261,000 * Plant wide outage in 1Q 2013, average monthly feed run is about 300,000 BPD 23
Safe, Stable, and Reliable Performance Mechanical Availability, 1 st Quartile Active Reliability Improvement Networks Electrical (ESARN), 34% improvement in program performance Fixed Equipment (MAIN), 29% improvement in program performance Rotating Equipment (ROTO), 51% improvement in pump reliability Instrumentation & Analyzers (PACE), baseline assessment in progress Maintenance Index, 1 st Quartile Routine Maintenance Planning and Scheduling initiative (year over year improvement) Schedule compliance has increased by 10% Preventative Maintenance On Time Completion has increased 38% Planning Accuracy has increased by 81% 9 8 7 6 5 4 3 2 1 0 Stewardable Unplanned Downtimes 8 6 2010 2011 2012 2013 YTD 4 0 24
Safe, Stable, Reliable Performance Turnaround Execution, 1 st Quartile Successfully completed Mega- Complexity Plantwide Turnaround in 1Q2013 (>1.2 million man hours in 47 days with a peak headcount of 3,000) Utilities, Power Distribution, and Flare infrastructure scope Complete Revamp of the Heavy Oil Cracker Regenerator internals, after nearly 17 year run HOC, Gasoline Desulfurization, Alkylation, Sulfur, Butane Upgrading, Isooctene, among major units in scope Utilized Valero s VTEP Process; a compilation of standard, basic, and best practices Operating Cost, 1 st Quartile Non-Energy Cash Opex $/EDC Maintenance Cash Opex $/EDC #1 Non Turnaround Maintenance Index # 6 Turnaround Index Workforce Efficiency, 1 st Quartile # 3 refinery in the North & South America for headcount / equivalent distillation capacity (EDC) 120 110 100 90 80 70 60 50 65 59 Personnel Index 65 68 69 70 3Q 2Q 1Q 2008 2009 2010 2011 2012 2013 YTD 25
Capital Budget Stewardship & Priorities Environmental & Safety Risk Mitigation Turnarounds and Catalyst Reliability Improvements Energy Strategic 26
Q & A 27
Appendix 28
Major Refining Processes Crude Processing Definition Separating crude oil into different hydrocarbon groups The most common means is through distillation Process Desalting Prior to distillation, crude oil is often desalted to remove corrosive salts as well as metals and other suspended solids. Atmospheric Distillation Used to separate the desalted crude into specific hydrocarbon groups (straight run gasoline, naphtha, light gas oil, etc.) or fractions. Vacuum Distillation Heavy crude residue ( bottoms ) from the atmospheric column is further separated using a lower-pressure distillation process. Means to lower the boiling points of the fractions and permit separation at lower temperatures, without decomposition and excessive coke formation. 29
Major Refining Processes Cracking Definition Cracking or breaking down large, heavy hydrocarbon molecules into smaller hydrocarbon molecules through application of heat (thermal) or the use of catalysts Process Coking Thermal non-catalytic cracking process that converts low value oils to higher value gasoline, gas oils and marketable coke. Residual fuel oil from vacuum distillation column is typical feedstock. Visbreaking Thermal non-catalytic process used to convert large hydrocarbon molecules in heavy feedstocks to lighter products such as fuel gas, gasoline, naphtha and gas oil. Produces sufficient middle distillates to reduce the viscosity of the heavy feed. Catalytic Cracking A central process in refining where heavy gas oil range feeds are subjected to heat in the presence of catalyst and large molecules crack into smaller molecules in the gasoline and lighter boiling ranges. Catalytic Hydrocracking Like cracking, used to produce blending stocks for gasoline and other fuels from heavy feedstocks. Introduction of hydrogen in addition to a catalyst allows the cracking reaction to proceed at lower temperatures than in catalytic cracking, although pressures are much higher. 30
Major Refining Processes Combination Definition Linking two or more hydrocarbon molecules together to form a large molecule (e.g. converting gases to liquids) or rearranging to improve the quality of the molecule Process Alkylation Important process to upgrade light olefins to high-value gasoline components. Used to combine small molecules into large molecules to produce a higher octane product for blending into gasoline. Catalytic Reforming The process whereby naphthas are changed chemically to increase their octane numbers. Octane numbers are measures of whether a gasoline will knock in an engine. The higher the octane number, the more resistance to pre or self ignition. Polymerization Process that combines smaller molecules to produce high octane blendstock. Isomerization Process used to produce compounds with high octane for blending into the gasoline pool. Also used to produce isobutene, an important feedstock for alkylation. 31
Major Refining Processes Treating Definition Processing of petroleum products to remove some of the sulfur, nitrogen, heavy metals, and other impurities Process Catalytic Hydrotreating, Hydroprocessing, sulfur/metals removal Used to remove impurities (e.g. sulfur, nitrogen, oxygen and halides) from petroleum fractions. Hydrotreating further upgrades heavy feeds by converting olefins and diolefins to paraffins, which reduces gum formation in fuels. Hydroprocessing also cracks heavier products to lighter, more saleable products. 32
List of Refining Acronyms AGO Atmospheric Gas Oil ATB Atmospheric Tower Bottoms B B Butane-Butylene Fraction BBLS Barrels BPD Barrels Per Day BTX Benzene, Toluene, Xylene CARB California Air Resource Board CCR Continuous Catalytic Regenerator DAO De Asphalted Oil DCS Distributed Control Systems DHT Diesel Hydrotreater DSU Desulfurization Unit EPA Environmental Protection Agency ESP Electrostatic Precipitator FCC Fluid Catalytic Cracker GDU Gasoline Desulfurization Unit GHT Gasoline Hydrotreater GOHT Gas Oil Hydrotreater GPM Gallon Per Minute HAGO Heavy Atmospheric Gas Oil HCU Hydrocracker Unit HDS Hydrodesulfurization HDT Hydrotreating HGO Heavy Gas Oil HOC Heavy Oil Cracker (FCC) H2 Hydrogen H2S Hydrogen Sulfide HF Hydroflouric (acid) HVGO Heavy Vacuum Gas Oil kv Kilovolt kva Kilovolt Amp LCO Light Cycle Oil LGO Light Gas Oil LPG Liquefied Petroleum Gas LSD Low Sulfur Diesel LSR Light Straight Run (Gasoline) MON Motor Octane Number MTBE Methyl Tertiary Butyl Ether MW Megawatt NGL Natural Gas Liquids NO X Nitrogen Oxides P P Propane Propylene PSI Pounds per Square Inch RBOB Reformulated Blendstock for Oxygenate Blending RDS Resid Desulfurization RFG Reformulated Gasoline RON Research Octane Number RVP Reid Vapor Pressure SMR Steam Methane Reformer (Hydrogen Plant) SO X Sulfur Oxides SRU Sulfur Recovery Unit TAME Tertiary Amyl Methyl Ether TAN Total Acid Number ULSD Ultra low Sulfur Diesel VGO Vacuum Gas Oil VOC Volatile Organic Compound VPP Voluntary Protection Program VTB Vacuum Tower Bottoms WTI West Texas Intermediate WWTP Waste Water Treatment Plant 33
Investor Relations Contacts For more information, please contact: Ashley Smith, CFA, CPA Vice President, Investor Relations 210.345.2744 ashley.smith@valero.com Karen Ngo Manager, Investor Relations 210.345.4574 karen.ngo@valero.com 34