July 31, 2012:

Two hydrocracker projects at Valero Energy's Texas and Louisiana refineries have been slightly delayed but are on track for completion over the next year, the company said on Tuesday. The San Antonio-based refiner said it would bring the hydrocracker project at its 290,000-barrels-per-day plant in Port Arthur, Texas to full rates in the fourth quarter after completing mechanical work in the third quarter. Similar work at its 205,000-bpd St. Charles plant in Norco, Louisiana will be completed at the end of this year and the hydrocracker will reach full operation in the second quarter of 2013, Valero said. "We have slipped a month or two on both projects," Valero Chairman and Chief Executive Bill Klesse said on an earnings conference call. "To be honest, some of my people will say that this is my schedule, not theirs," he added, referring to the planned second-quarter restart of the St. Charles hydrocracker.

The two projects are designed to raise diesel production at the refineries, thereby increasing gross margins via exports. Valero said distillates will account for 39 percent to 40 percent of yield throughout its refineries once the projects are completed, compared with 33 percent to 34 percent at present. Klesse added he foresees a competitive market for U.S. distillate exports even with the addition of new hydrocrackers at other Atlantic Basin refineries in the next 12 months. "The U.S.-produced stuff is going to be ... very competitive. Whether we can squeeze it into the market; We think we will be able to," he said. "I wish I had the hydrocrackers today," he added.

Valero reported $1.4 billion operating income in the second quarter, up from $1.3 billion a year earlier, due to higher margins at its Midwest, West Coast and East Coast refineries and an extra 342,000-bpd throughput following its acquisition of the Pembroke plant in Wales and Meraux in Louisiana. Refinery margins in the Gulf Coast were weaker, partially offsetting income gains, it stated.

REFINERY TURNAROUND, RESTART

Valero also plans to bring back its fire-hit 125,000-bpd Meraux, Louisiana refinery to full operation at the end of August, although some units will be restarted as early as next week, it said. It had shut all units at the refinery, which it acquired in October last year, following a fire in late July. Maintenance costs are expected to reach as high as $10 million at Meraux, Klesse said. The company is undertaking a project to enable more distillate production at the plant and plans to integrate gasoline production with the nearby St. Charles refinery. The gasoline-making unit at the 132,000-bpd refinery in Benicia, California will be back in service in mid-August, in an email. The company had shut the unit last week after a compressor malfunction.In the second quarter, Valero completed major turnaround projects at the St. Charles and the 156,000-bpd McKee refinery in Sunray, Texas.

In September, Valero will bring a gasoline-making fluid catalytic cracking unit off line at the 88,000-bpd plant in Houston for planned work that will last eight weeks. Eight-week maintenance work will follow on a crude unit at the Pembroke refinery in October.  More maintenance work is planned for Texas refineries in first quarter 2013 --the 225,000 bpd refinery in Texas City and the 200,000 bpd plant in Corpus Christi. Valero also plans work at its Quebec City, Quebec refinery in Canada in the first quarter. The refiner is ramping up its domestic shale crude intake and ran more Eagle Ford and Bakken oil at its Gulf Coast and Midwest refineries in the second quarter.  The 93,000-bpd refinery in Three Forks and its 200,000-bpd plant at Corpus Christi, both of which are close to the Eagle Ford shale in south Texas, ran some 140,000 bpd of crude from the shale prospect. The 180,000-bpd Memphis plant in Tennessee ran most of the 130,000-bpd Bakken crude Valero processed throughout its system. It received Bakken crude shipments from the St. James, Louisiana terminal, aboard the Capline pipeline.

ETHANOL BUSINESS TAKES A HIT

Valero reported a 92 percent drop in its ethanol production margins from a year earlier, as high inventories in the industry weighed on margins. The ethanol segment of its business logged operating income of $5 million in the quarter. The company significantly reduced ethanol production rates in July due to negative margins, rising corn prices, and high inventory levels, it said.

By Reuters

July 31, 2012:

Valero Energy Corp.'s net income increased 11.7 percent in the second quarter as it expanded its fuel-making operation in the United Kingdom. The San Antonio oil refiner also said Tuesday it plans to split off its retail gasoline business. Valero is looking at several options, including the distribution of the business to shareholders. Chairman and CEO Bill Klesse said the move will make the company more flexible. "As independent companies, both retail and the remaining business will be better-positioned to focus on their industry-specific strategies," Klesse said. It's making the announcement at a time when the gasoline business looks especially attractive. Valero's retail business boosted income by 27.4 percent in the second quarter. Shares of Valero rose $1.20, or 4.6 percent, to $27.28 in premarket trading.

Valero makes and sells gasoline and other petroleum products at 16 plants in North America and Europe. It expanded its operation in August, buying the Pembroke refinery in Wales from Chevron Corp. for $1.7 billion. The Pembroke refinery boosted Valero's results during the April-June quarter. Valero reported earnings of $831 million, or $1.50 per share, for in the period. That compares with $744 million, or $1.30 per share, for the same part of 2011. Revenue increased by 10.8 percent to $34.7 billion. Analysts were expecting earnings of $1.44 per share on revenue of $33.6 billion, according to FactSet. During the period, Valero said that the addition of the Pembroke plant helped the company increase production in the quarter by 15.2 percent to 2.68 million barrels per day. The increase made up for weaker profit margins in the period. Valero's refineries earned $5.64 per barrel in the second quarter, compared with $5.94 per barrel a year earlier. Profitability fell as the price of imported oil rose.

By Bloomberg

July 31, 2012:

Gasoline declined as Sunoco Inc. (SUN) may start a fluid catalytic cracker at the largest East Coast refinery and as Enbridge Inc. (ENB) may reopen an oil pipeline tomorrow that serves the Chicago area. Futures fell as Sunoco plans to start the catalytic cracker today after shutting it July 23 for unplanned work, a person with knowledge of the situation said. Repairs on Enbridge’s 317,000-barrel-a-day Line 14 may be completed today, a state regulator said late yesterday. “Restarting some units is giving prices a little bit of a break,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “People were panic buying, particularly in the Chicago cash market. The pipeline coming back online should put some downward pressure on price.”

Gasoline for August delivery fell 2.22 cents, or 0.8 percent, to settle at $2.9146 a gallon on the New York Mercantile Exchange. Futures gained 6.9 percent this month. It’s the first monthly rise since an 11 percent jump in March and the largest July increase since 2009. The more actively traded September contract declined 4.41 cents, or 1.6 percent, to $2.7743 a gallon. August gasoline and heating oil contracts expired at the close of floor trading today. Gasoline inventories probably rose 800,000 barrels last week, the median estimate of 12 analysts in a survey by Bloomberg. Distillate stockpiles probably increased 1.1 million barrels. The Energy Department is scheduled to report last week’s oil supplies at 10:30 a.m. tomorrow in Washington.

Selling Pressure

“Products are getting selling pressure at expiration and there is the expectation of a build,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.’’ Heating oil for August delivery declined 3.74 cents, or 1.3 percent, to $2.8417 a gallon, and gained 5.4 percent in July. The September contract fell 3.34 cents, or 1.2 percent, to $2.848 a gallon. Regular gasoline at the pump, averaged nationwide, rose 1.4 cents to $3.50 a gallon, AAA said today on its website. That’s the highest price since June 17. Prices have fallen 11 percent from a 2012 high of $3.936 on April 4, according to AAA, the nation’s largest motoring organization.

By Bloomberg

July 31, 2012:

COLUMBUS --  The Ohio AAA says gas prices have spiked more than 20 cents per gallon because of regional supply concerns brought on by refinery issues. The AAA says the price of a gallon of unleaded gas in Ohio started Monday at an average of $3.46 but at many station jumped during the day to an average of $3.69. The hike was attributed to problems at Chicago-area refineries that bumped up wholesale prices for the entire region. The AAA said Tuesday that prices may continue to rise until the issues are resolved.  Nationally, the average price at the pump has also increased, along with global oil prices. According to AAA's Monthly Gas Price Report, the national average gas price increased 17 cents a gallon during July.

By wkyc.com

July 31, 2012:

BP Plc plans to take the largest of three crude units at its Whiting, Ind., refinery offline in the fourth quarter as part of a $4 billion upgrade project at the refinery, the company said in its second-quarter earnings conference call.  The project, which will help the refinery to process more Canadian heavy crude, will be completed in the second half of 2013, it said. The project includes the addition of a new crude distillation unit, a 100,000 barrels-per-day (bpd) coker, hydrotreating and sulfur recovery units and improvements in infrastructure, according to the company website. The Whiting refinery has a 337,000 bpd capacity.

By Chicago Tribune