HOUSTON Jan 15 Valero Energy Corp plans
to run more cheap inland U.S. crude with a new unit to help
process it at the company's Houston refinery.
It also plans to buy 2,000 railcars to increase rail
shipments of inland crudes where pipelines are lacking, Valero
said at an investor presentation.
At the presentation on Jan. 8, the world's largest
independent refiner unveiled a plan to spend $220 million to
$280 million to build a crude oil "topper" at its 90,000
barrels-per-day (bpd) refinery in Houston.
Although the Houston plant is configured to process mostly
light-sweet crude, such as Light Louisiana Sweet, the crude
produced in the prolific Eagle Ford shale play in south Texas is
even lighter, Valero spokesman Bill Day said.
A topper will help the plant's crude unit run more of that
lighter crude to maximize production of gasoline and diesel.
"This is more like an expansion at the Houston refinery,
which will enable us to process even more Eagle Ford there," he
John Auers, senior vice president and a refinery specialist
at Turner, Mason & Co in Dallas, said a topper can essentially
skim off material too light for the crude unit to run, allowing
it to handle the rest.
"They're really just putting in equipment to allow them to
handle the extra-light material," Auers said.
Other refiners have upgrade plans to increase such runs as
well. Last August, privately-held Flint Hills Resources
LP said it planned to spend $250 million to increase
Eagle Ford runs at its 285,000 bpd refinery in Corpus Christi,
Texas, as well as cut emissions at the plant. The company is
seeking permits for the project.
Valero now runs about 140,000 bpd of Eagle Ford crude in
several refineries, including Houston, 205,000-bpd Corpus
Christi and 95,000-bpd Three Rivers.
Valero aims to finish the topper in early 2015. The company
also runs about 40,000 bpd of North Dakota Bakken crude at its
180,000 bpd refinery in Memphis, Tennessee. That crude moves by
rail to the St. James, Louisiana, oil hub and is then
transported back north through Royal Dutch Shell's
Capline pipeline system.
Regarding the railcars, Valero plans to buy 2,000 to bring
its fleet to 9,000.
"We're looking to rail to other places not served by
pipelines," Day said.
He did not specify which Valero refineries would get more
crude by rail, but the company's California plants are among
those that lack pipeline access.
Valero had discussed buying or leasing more railcars in
general terms, but the presentation is the company's first
public announcement of specific numbers.
Analysts say the push by refiners and pipeline companies to
move more crude by rail has squeezed railcar manufacturers and
the wait for new orders can be up to 18 months or more.
Day said Valero's orders have been on the books and the
company hopes to receive the 2,000 railcars in 2013.
Phillips 66 announced plans last year to buy 2,000
railcars to increase access to inland crudes. The company
expects to begin receiving the cars early this year.