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Friday, Sep. 4, 1998
Valero expands processing operations
Refinery boosts its yield during a tough year for oil industry
By GLASTON FORD
Staff WriterValero Energy Corp.'s Corpus Christi refinery has responded to changing oil prices by processing grades of crude oil that it previously could not handle.
Valero was in a position to switch to cheaper grades of crude oil feedstock because it spent $6 million earlier this year on modifications that allowed more flexibility in choosing feedstocks.
The change has helped the refinery reduce its costs and improve its yield during a difficult year for the refining industry, Valero officials said.
The refinery was built to handle high-sulfur residual fuel oil, not a crude oil, which comes from the bottom of Saudi Arabian light crude oil. Residual fuel oil is traditionally cheap, but in the current market there are cheaper grades of crude oil, said Mary Rose Brown, vice president of corporate communications for Valero.
The crude is worth about an extra $1.25 per barrel of crude processed to the refinery, or $50,000 a day given current processing levels of 40,000 barrels per day of the crude, the company said.
If the prices change, Valero can switch back to the residual oil, Brown said.
The new crude also increases the refinery's processing capacity by 13,000 barrels per day, which reduces its costs per barrel, Brown said. The refinery has a total refining capacity of 190,000 barrels per day of various feedstocks.
The refinery can process the crude oil and the residual oil, Brown said.
``The more flexible you are in the feedstocks the better you are able to adapt to market fluctuations,'' she said.
Valero plans to invest in all its refineries to prepare for market changes and remain profitable, Brown said.
The change comes in the midst of a bad year for the refining industry, analysts say.
Inventories of heating oil and gasoline are exceptionally high, which means lower prices for refiners, said Larry Tedeschi, an energy analyst with Banc One Investment Advisors Corp.
One U.S. refinery has already announced production cutbacks and some refineries appear to be going ahead with their maintenance shutdowns earlier than usual, he said.
The refining industry fared well in 1997 as the price of crude oil came down, in part because the price of their feedstock was dropping faster than the price of retail products, he said.
But a warm winter left inventories of heating oil higher than normal, he said.
And the lack of demand for heating oil caused refiners to beef up their gasoline production earlier than usual, so they began the summer driving season with high gasoline inventories.
Each refinery makes a variety of petroleum products and can modify their processes to change the percentages, depending on market demands, Tedeschi said.
Usually about this time of year refiners would start producing more heating oil again, but inventories are still high, Tedeschi said.
``Now they have heating oil out their ears and gasoline out their ears,'' he said.
What the industry needs is an early, cold winter, he said. ``I would think that it is going to be tough for the rest of the year.''
Valero's Corpus Christi refinery, which can convert heavy feedstocks such as the high-sulfur residual oil into premium products, makes money even when margins are low, Brown said.
Valero views the current market as a good time to make additional acquisitions, she said.
In May, Valero announced that it will buy Mobil Corp.'s refinery and its inventory of crude oil and fuel in Paulsboro, N.J., for $336 million.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web