valero energy Texas City Refinery Tour – November 13, 2007

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Texas City Refinery Tour November 13, 2007

2

Basics of RefiningDesulfurizationHydrocrackingTexas City Refinery OperationsQ&APlant TourConcluding Remarks

Agenda

3

Jonathan StuartVice President

Regional Refinery Operations

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Crude Oil Characteristics

Crudes are classified and priced by density and sulfur contentCrude density is commonly measured by API gravity• API gravity provides a relative measure of crude oil density • The higher the API number, the lighter the crude

−

Light crudes are easier to process −

Heavy crudes are more difficult to process

Crude sulfur content is measured as a percentage• Less than 0.7% sulfur content = sweet• Greater than 0.7% sulfur content = sour• High sulfur crudes require additional processing to meet regulatory specs

Acid content is measured by Total Acid Number (TAN)• Acidic crudes highly corrosive to refinery equipment• High acid crudes are those with TAN greater than 0.7

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Crude Oil Basics

Majority of global reserves are sourMost quoted benchmark prices are light sweet crudes

• WTI (West Texas Intermediate), Western Hemisphere• Brent (North Sea Crude), Europe

Historical trend shows global crude supply becoming heavier and more sour

Estimated Quality of Reserves (2006)

13%

20%

66%

2%

High Acid(Sweet)

Source: Oil & Gas Journal, Company Information

Light/MediumSour

HeavySour

Sweet

SWEE

T

SU

LFU

R C

ON

TEN

T

S

OU

R

HEAVY API GRAVITY LIGHT

Crude Quality by Types

Source: Industry reportsNOTE: Red line represents the average crude quality by decade (actual and projected)

Arab Heavy

Arab Medium

Arab Light

Alaskan North Slope

Iran Heavy

DubaiMars

TapisWTIBrent

Bonny LightCabinda

Napo

Cold Lake

WCSMaya

Ameriven-Hamaca

M-100 (resid)

1980

19902000

2010

Urals

Cerro Negro

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

15 20 25 30 35 40 45 50

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What’s in a Barrel of Crude Oil?

50%

26%

21%

3%

63%

22%

14%1%

33%

34%

30%

3%> 34 API Gravity

< 0.7 % Sulfur

35% Demand

Most Expensive

24 – 34 API Gravity

> 0.7 % Sulfur

50% Demand

Less Expensive

< 24 API Gravity

> 0.7 % Sulfur

15% Demand

Least Expensive

Refineries upgrade crude oil to higher value products

2005 U.S. Production

8% Propane/Butane

50%

GasolineRFGConventionalCARBPremium

33% DistillateJet FuelDieselHeating Oil

Heavy Fuel Oil & Other

10%

Source: EIA Refiner Production

Refinery Gases7%

Light Sweet Crude(e.g. WTI, Brent, Saharan

Blend)

Medium Sour Crude(e.g. Mars, Arab Light,Arab Medium, Urals)

Heavy Sour Crude(e.g. Maya, Cerro Negro, Cold

Lake, Western Canadian Select)

Crude Types Characteristics Yields

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Basic Refining Concepts

DistillationTower

(CrudeUnit)

Propane, Butane and lighter

• Refinery fuel gas • Propane• NGLs

< 90°F

Straight Run Gasoline (low

octane)• Gasoline (high octane)

90–220°F

Naphtha • Gasoline (high octane)• Jet fuel

220–315°F

Kerosene• Kerosene • Jet fuel• Diesel • Fuel oil

315–450°F

Light Gas Oil• Gasoline (high octane)• Diesel• Fuel oil

450–650°F

Heavy Gas Oil650–800°F

Residual Fuel Oil/Asphalt

800+°F

Furnace

VacuumUnit

More

• Gasoline (high octane)• Diesel• Fuel oil

• Gasoline (high octane)• Diesel• Fuel oil• Lube stocks

Intermediates Final Products

processing

More

processing

More

processing

More

processing

More

processing

More

processing

Crude oil

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Hydroskimming/Topping Refinery

LightSweetCrude

100% Total Yield

Heavy Fuel Oil & Other

30%GasolineRFGConventionalCARBPremium

Simple, low upgrading capability refineries run sweet crude

Propane/Butane

Hydrogen

Crude Unit

Vacuum Unit

Reformer

Propane/Butane

High Octane Gasoline

Heavy Fuel Oil

LS Diesel/Heating Oil

Distillate Desulfurizer

HS Diesel/Heating Oil

HS Kerosene/Jet Fuel

Gas Oil

4%

32%


Dis

tilla

tion

Tow

er

Low Octane Gasoline and Naphtha

LS Kerosene/Jet Fuel

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Crude and Vacuum Towers

Crude Atmospheric Tower Vacuum Tower Reformer

Heater

Reactor

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Medium Conversion: Catalytic Cracking

Moderate upgrading capability refineries tend to run more sour crudes while achieving increased higher value product yields and volume gain

Hydrogen

Light Cycle Oil (LCO)

Crude Unit

Vacuum Unit

Reformer

Alkylation Unit

Propane/Butane


Heavy Fuel Oil

FCC Gasoline

Alkylate

Distillate Desulfurizer



Gas OilFluid Catalytic Cracker (FCC)

104% Total Yield

Heavy Fuel Oil & Other24%

Dis

tilla

tion

Tow

er

Propane/Butane8%



LightSour

Crude

Low Octane Gasoline and Naphtha



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High Conversion: Coking/Resid Destruction

Complex refineries can run heavier and more sour crudes while achieving the highest light product yields and volume gain

108% Total Yield

Heavy Fuel Oil & Other15%

Propane/Butane7%



Hydrogen

LCO

Reformer

Medium Gas Oil

Propane/Butane

Heavy Fuel Oil

FCC Gasoline

Alky Gasoline

Hydrogen Plant

Coke

Gas

DelayedCoker

Fluid Catalytic Cracker (FCC)

Alkylation Unit

DistillateDesulfurizer

Crude Unit

Vacuum Unit

Light Gas Oil Hydrocrackate Gasoline

Ultra Low Sulfur Jet/Diesel

Hydrocracker

Medium/ Heavy Sour

Crude Dis

tilla

tion

Tow

er Low Octane Gasoline and Naphtha






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FCC and Hydrocracker ReactorsReactor

RegeneratorMain Column

Hydrocracker ReactorsFluidized Catalytic Cracker

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CokersDelayed Coker

Superstructure holds the drill and drill stem while the coke is forming in the drum Fluid Coker - Benicia

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Conversion Economics

Need conversion capacity to capitalize on sour crude discounts• Hydroskim – Breakeven or moderate margins; High resid yield

−

When margins are positive – increase crude runs−

When margins are negative – decrease crude runs• Cracking – Better margins; Lower resid yield• Coking – Best margins; Lowest resid yield

−

Maximize heavy crudes

U.S. Gulf Coast Refinery Margins

(10)

(5)

0

5

10

15

20

25

30

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07

U S

$ /

B b

l

Arab Medium Hydroskimming LLS Cracking Maya Coking

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Desulfurization Basics

High SulfurLight

Products(HC-S)

Desulfurization Unit

Sulfur Plant• Agricultural• Pharmaceutical

Desulfurized Light Products

ElementalSulfur

HC-S

HC-SSHC-S

SS

Catalyst

HC-SS

HC-S

S

HC

H2S S

HC-S

H2

Hydrogen UnitH2

H2H2

H2

H2H2

H2

H2H2

H2

LEGENDHC : HydrocarbonH2 : HydrogenS : Sulfur


1000 or less PSI;700 F or less

ObjectiveRemove sulfur from light products (gasoline or diesel) to meet air quality requirements for clean burning fuels

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Hydrocracking Basics



ObjectiveValue added upgrading of high sulfur distillates to low sulfur gasoline and ultra low sulfur jet/diesel to meet air quality requirements for clean burning fuels

High SulfurDistillate(HC-S)

Hydrocracking Unit

HC-S

HC-S

HC-S

Catalysts

HC-S

HC-S

Desulfurized Hydrocrackate GasolineHC

Sulfur Plant• Agricultural• Pharmaceutical

ElementalSulfur

SS

SSS

H2S S

HC-S

H2

H2H2

H2

Desulfurized Ultra Low Sulfur Jet/DieselHC

H2

H2 H2

H2

H2H2

1300+ PSI;725 to 780 F

H2

Hydrogen UnitH2

H2H2

H2

H2H2

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Michael HarrisonVice President and General Manager

Texas City Refinery

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Valero Texas City Refinery

Acquired by Valero in 1997 via purchase of Basis Petroleum from Solomon, Inc.

Located along Houston’s Deep Water Ship Channel at the Port of Texas City

Began operations in 1908. Supported World Wars I and II

Throughput capacity of 245,000 barrels per day of crude and other feedstocks

Produces gasoline, jet fuel, diesel,

LPG, sulfur and chemical feedstocks

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Valero Texas City Refinery

Staffed by over 500 full-time employees and 300 continuing service contractors

Recognized as an “OSHA VPP Star Site”

Received VPP “Star Among Stars Status in 2003

Received VPP “Spirit Award” in 2004

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Texas City Products and Feedstock Slate

Product BPD %Gasoline 94,000 40

Ultra Low Sulfur Diesel 50,000 21

Jet Fuel 36,000 15

Diesel Intermediates 26,000 11

Low Sulfur VGO 15,000 6

Propylene 11,000 4

Propane 3,000 1

Petroleum Coke(tons/day)

4,000 <1

Sulfur (tons/day) 800 <1

Total Liquid Products 235,000

Crude S % / API BPD %Arab Medium / Kuwait 2.7 / 30.7 106,000 46

Maya 3.5 / 21.1 90,000 39

Green Canyon 2.2 / 30.4 14,000 6

High Sulfur VGO 5.0 / 12.2 7,000 3

Residual Oil 6.3 / 4.2 7,000 3

Gasoline Components 6,000 3

Total 230,000 100

Typical Product Slate Typical Feedstock Slate

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Over $900 MM invested in capital improvements and $300 MM for turnaround maintenance at Texas City since Valero’s acquisition

• Delayed Coker Unit – 45 MBPD Capacity−

Started up in 2003

• Gasoline Desulfurization Unit – 48 MBPD Capacity−

Started up in 2003

• LPG Recovery Unit – 35 MM SCF/D Capacity−

Started up in 2004

• Steam Boilers (3)−

Started up in 2005 and 2006

• Electrical Substation−

Operational in 2006

• Administrative Office and Central Control Center−

Occupied May 2005

• Major plant turnaround just completed ($80 MM Turnaround Maintenance and $70 MM Capital Improvements).

Texas City Capital Investments

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Appendix

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Texas City Refinery Flow Diagram

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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.

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Major Refining Processes – Cracking

Definition• “Cracking” or breaking down large, heavy hydrocarbon molecules into

smaller hydrocarbon molecules thru application of heat (thermal) or through 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 surrounding 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.

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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 with 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 blending stock.

• 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.

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Major Refining Processes – Treating

Definition• Processing of petroleum products to remove some of the sulfur, nitrogen,

heavy metals, and other impuritiesProcess• 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 parafins, which reduces gum formation in fuels. Hydroprocessing also cracks heavier products to lighter, more saleable products.

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List of Refining AcronymsAGO – Atmospheric Gas OilATB – Atmospheric Tower BottomsB–B – Butane–Butylene FractionBBLS – BarrelsBPD – Barrels Per DayBTX – Benzene, Toluene, XyleneCARB – California Air Resource BoardCCR – Continuous Catalytic RegeneratorDAO – De–Asphalted OilDCS – Distributed Control SystemsDHT – Diesel HydrotreaterDSU – Desulfurization Unit EPA – Environmental Protection AgencyESP – Electrostatic PrecipitatorFCC – Fluid Catalytic CrackerGDU – Gasoline Desulfurization UnitGHT – Gasoline HydrotreaterGOHT – Gas Oil HydrotreaterGPM – Gallon Per MinuteHAGO – Heavy Atmospheric Gas OilHCU – Hydrocracker UnitHDS – HydrodesulfurizationHDT – HydrotreatingHGO – Heavy Gas OilHOC – Heavy Oil Cracker (FCC)H2 – HydrogenH2S – Hydrogen SulfideHF – Hydroflouric (adic)HVGO – Heavy Vacuum Gas OilkV – Kilovolt

kVA – Kilovolt AmpLCO – Light Cycle OilLGO – Light Gas OilLPG – Liquefied Petroleum GasLSD – Low Sulfur DieselLSR – Light Straight Run (Gasoline)MON – Motor Octane NumberMTBE – Methyl Tertiary–Butyl EtherMW – MegawattNGL – Natural Gas LiquidsNOX – Nitrogen OxidesP–P – Propane–PropylenePSI – Pounds per Square InchRBOB – Reformulated Blendstock for Oxygen Blending RDS – Resid DesulfurizationRFG – Reformulated GasolineRON – Research Octane NumberRVP – Reid Vapor PressureSMR – Steam Methane Reformer (Hydrogen Plant)SOX – Sulfur OxidesSRU – Sulfur Recovery UnitTAME – Tertiary Amyl Methyl EtherTAN – Total Acid NumberULSD – Ultra–low Sulfur DieselVGO – Vacuum Gas OilVOC – Volatile Organic CompoundVPP – Voluntary Protection ProgramVTB – Vacuum Tower BottomsWTI – West Texas IntermediateWWTP – Waste Water Treatment Plant

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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.

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valero energy Texas City Refinery Tour – November 13, 2007

Economy & Finance