UPDATE 2-Valero sees expansion of U.S. crude and exports

Tue Jan 29, 2013 5:29pm EST

Related Topics

* Valero to have 9,000 rail cars to ship crude by end '13

* Company plans to run refineries up to 95 pct of capacity (Recasts throughout)

HOUSTON Jan 29 (Reuters) - Leading U.S. independent refiner Valero Energy Corp plans to expand its use of domestic U.S. crude oil as well as increase exports of refined products, company executives said during an earnings conference call on Tuesday.

The company's net income rose to $1 billion in the fourth quarter of 2012 from $45 million in 2011 due to lower costs for medium and heavy sour crude as well as for sweet crude, that primarily coming from the newly developed U.S. oilfields.

"In the fourth quarter of 2012, we replaced all imported light foreign crude oils with cheaper domestic crude oils at our Gulf Coast and Memphis refineries," said Valero Chairman and Chief Executive Bill Klesse in a statement.

Three years ago, most of the oil processed at the eight refineries along the Gulf Coast and in Tennessee, with a combined intake of 1.7 million barrels per day, was foreign crude, said Valero spokesman Bill Day.

"Actually in the quarter we continued to push to run more domestic light sweet crude," said Valero President and Chief Operating Officer Joe Gorder. "We were up over 700,000 barrels a day."

To take advantage of the growth in U.S. domestic oil production, Valero is spending slightly less than $1 billion on logistics projects.

By the end of the year Valero will have 9,000 rail cars to ship crude to refineries on the West Coast, the Gulf Coast, in Quebec and in Memphis.

Valero is also looking at possibly using rail to ship Canadian crude from the tar sands fields in Alberta to the Gulf Coast, in addition to shipping the crude via barge.

Rail would not be the cheapest way to move heavy, sour Canadian crude to the Gulf, Valero President and Chief Operating Officer Joe Gorder.

"The Keystone pipeline would be the cheapest way to do that," Gorder said.

The Keystone XL pipeline was put on hold last year by the Obama administration over concerns leaks from it could contaminate groundwater in Nebraska. The pipe would run from Hardisty, Alberta, to near Port Arthur, Texas, bringing Canadian crude oil to the Gulf Coast.

But expansion of dock space at the St. Charles refinery in Norco, Louisiana, and at the Port Arthur, Texas, refinery will boost exports.

Valero's gasoline exports are expected to rise to 250,000 barrels from 225,000 currently, Gorder said. Distillate exports are expected to climb to 425,000 barrels in 2013 from 280,000.

The San Antonio-based refiner also said its 14 refineries are expected to have a combined throughput of 2.575 million barrels per day, or 95 percent of total capacity, in the first quarter.

Combined throughput could be as low as 91.5 percent of capacity, or 2.485 million bpd, in the quarter, Valero said. (Reporting by Erwin Seba; Editing by John Wallace and Bob Burgdorfer)

FILED UNDER: