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Feb 2018 Barclays Teach-In FINAL (2-15-2018) PDF
Feb 2018 Barclays Teach-In FINAL (2-15-2018) PDF
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Gary Simmons
SVP Supply, International Operations & Systems Optimization
Agenda
2 Refining basics
3 Refinery optimization
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Crude Oil Characteristics
Light, sweet, low TAN crudes are easier to process and tend to trade at premiums to heavier, higher sulfur, more
acidic crudes which require additional conversion capacity to upgrade
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Crude Oil Basics
Cold Lake
WCS
Western Basrah
Europe Middle East 3.0
0.7% 49% Southern Green
Canyon
FSU /
Arab Medium
Eastern
Mars
Europe
2.0 Castilla Blend
7% Arab Light
WTS
Africa
8% Alaskan
North Slope
1.0
Western WTI Midland
Hemisphere Asia Pacific Bakken
(excl North Dalia Brent Eagle Ford
Canada U.S. 3% LLS Eagle Ford
America) Tapis Condensate
10% 2% Qua Iboe
20%
0.0
15 20 25 30 35 40 45 50 55 60
Mexico API Gravity
0.6%
Source: EIA Source: Industry reports
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What’s in a Barrel of Crude Oil?
Crude Oil Types Characteristics Inherent Yields
2017 U.S. Refinery
> 34 API Gravity 3% Production
Light Sweet < 0.7 % Sulfur 32%
(e.g. WTI, LLS, Brent) Propane/
Refinery
8%
4% Butane
35% Demand 30% Gases
Most Expensive
35% Gasoline
RBOB
46% CBOB
24 to 34 API Gravity 2% Conventional
Medium Sour CARB
(e.g. Mars, WTS, > 0.7 % Sulfur 24% Premium
Arab Medium, Basrah) 50% Demand 26%
Distillate
Less Expensive 48% Jet Fuel
39% Diesel
Heating Oil
Refineries upgrade crude oil into higher value gasoline and distillates
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Basic Refining Concepts
Intermediates Final Products
Light Ends
< 90°F Propane, Butane, Recovery & • Refinery fuel gas
and lighter • Propane
C1 to C4 hydrocarbons Treatment
• NGLs
90–220°F Isomerization
Light Virgin Naphtha • Gasoline
C5 to C8 (low octane) Blending
FCC • Gasoline
Vacuum 650–800°F
Heavy Gas Oil • Diesel
Distillation Hydrocracker • Fuel oil
C30 to C50+
Unit
Coker • Gasoline
800+°F Residual Fuel Oil / • Diesel
C50 to C100+ Asphalt Resid • Fuel oil
Hydrocracker • Lube stocks
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Hydroskimming (Topping) Refinery
Crude
Unit Propane/
Propane/Butane
4% Butane
Gas Oil
Heavy
Vacuum 32% Fuel Oil &
Unit Other
Heavy Fuel Oil
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Crude and Vacuum Distillation Towers
Crude
Tower
Vacuum
Tower
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Medium Conversion: Catalytic Cracking
Crude Propane/
Unit Propane/Butane 8% Butane
Low Octane Gasoline
and Naphtha Gasoline
Reformer High Octane Gasoline RBOB
CBOB
43% Conventional
Distillation Tower
CARB
Hydrogen Premium
Alkylation
Alkylate
Fluid Unit
Gas Oil
Catalytic
Cracker FCC Gasoline
Vacuum Heavy
(FCC) 19%
Unit Fuel Oil &
Other
Heavy Fuel Oil
Moderate complexity refineries tend to run more sour crudes, yield more high value products, and achieve
higher volume gain
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Fluid Catalytic Cracker
Reactor
Regenerator
Main
Column
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High Conversion: Coking/Resid Destruction
Crude Hydrogen Plant
Gas
Unit Propane
6% Butane
Propane/Butane
CARB
Hydrogen Premium
High complexity refineries can run heavier, more sour crudes while achieving the highest light product yields and volume gain
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Hydrocracker
• Upgrades high sulfur gasoil into low sulfur gasoline, jet, and diesel
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Cokers
Delayed Coker Fluid Coker
Superstructure holds the drill and drill stem while the
coke is forming in the drum
Upgrades low value residual fuel oil into higher value light products
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Greg Bram
VP Supply Chain Optimization
Maximizing Refinery Profit
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LP Example: What’s for Breakfast?
$2.50
$2.00
$4.00
$3.50
$2.50
Nutritional Information
Serving Size $/Serving Protein (g) Total Fat (g)
Bagel 1 large bagel $ 2.00 3 1
Oatmeal 1 cup $ 2.50 4 1
Eggs 2 large eggs $ 3.50 6 5
Bacon 3 slices $ 4.00 8 8
Orange juice 1 cup $ 2.50 2 0
Your goal is to consume at least 18 grams of protein, but not more than 10 grams of total fat
for the lowest cost.
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Optimizing Breakfast from an Engineer’s Point of View
Solve for number of servings of each item
Even with only five food choices, there are so many possible combinations that using trial and error to find the one with
the lowest cost isn’t efficient
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What’s Best?
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Crude Oil Valuation
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Crude Break Even Values
Break Even Value (BEV) = Alternate Crude Total Product Value - Reference Crude Total Product Value
Break Even Versus $99/bbl $51/bbl BEV as % of Crude Value BEV as % of Crude Value
Light Sweet Crude Crude Crude @ $99/bbl @ $51/bbl
BEV for alternate crude as a percentage of reference crude value is relatively insensitive to flat price environment
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Crude Oil Differentials Versus ICE Brent
5%
Premium
0%
-5%
-10%
Discount
-15%
-20%
Maya (heavy sour) ASCI (medium sour) ANS WTI LLS
-25%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Argus; 2018 prices through Feb 13. All prices are spot values. ASCI represents Argus Sour Crude Index.
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Questions and Answers
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Appendix Contents
Topic Pages
Major Refining Processes – Crude Processing 26
Refining Acronyms 30
IR Contacts 31
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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 through application of heat (thermal) or 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 lighter boiling 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 into 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
blendstock.
– 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 impurities
• Process
– 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 paraffins, which reduces gum
formation in fuels. Hydroprocessing also cracks heavier products to lighter, more saleable
products.
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Refining Acronyms
• AGO – Atmospheric Gas Oil • kVA – Kilovolt Amp
• ATB – Atmospheric Tower Bottoms • LCO – Light Cycle Oil
• B–B – Butane-Butylene Fraction • LGO – Light Gas Oil
• BBLS – Barrels • LPG – Liquefied Petroleum Gas
• BPD – Barrels Per Day • LSD – Low Sulfur Diesel
• BTX – Benzene, Toluene, Xylene • LSR – Light Straight Run (Gasoline)
• CARB – California Air Resource Board • MON – Motor Octane Number
• CCR – Continuous Catalytic Regenerator • MTBE – Methyl Tertiary–Butyl Ether
• DAO – De–Asphalted Oil • MW – Megawatt
• DCS – Distributed Control Systems • NGL – Natural Gas Liquids
• DHT – Diesel Hydrotreater • NOX – Nitrogen Oxides
• DSU – Desulfurization Unit • P–P – Propane–Propylene
• EPA – Environmental Protection Agency • PSI – Pounds per Square Inch
• ESP – Electrostatic Precipitator • RBOB – Reformulated Blendstock for Oxygenate Blending
• FCC – Fluid Catalytic Cracker • RDS – Resid Desulfurization
• GDU – Gasoline Desulfurization Unit • RFG – Reformulated Gasoline
• GHT – Gasoline Hydrotreater • RON – Research Octane Number
• GOHT – Gas Oil Hydrotreater • RVP – Reid Vapor Pressure
• GPM – Gallon Per Minute • SMR – Steam Methane Reformer (Hydrogen Plant)
• HAGO – Heavy Atmospheric Gas Oil • SOX – Sulfur Oxides
• HCU – Hydrocracker Unit • SRU – Sulfur Recovery Unit
• HDS – Hydrodesulfurization • TAME – Tertiary Amyl Methyl Ether
• HDT – Hydrotreating • TAN – Total Acid Number
• HGO – Heavy Gas Oil • ULSD – Ultra–low Sulfur Diesel
• HOC – Heavy Oil Cracker (FCC) • VGO – Vacuum Gas Oil
• H2 – Hydrogen • VOC – Volatile Organic Compound
• H2S – Hydrogen Sulfide • VPP – Voluntary Protection Program
• HF – Hydroflouric (acid) • VTB – Vacuum Tower Bottoms
• HVGO – Heavy Vacuum Gas Oil • WTI – West Texas Intermediate
• kV – Kilovolt • WWTP – Waste Water Treatment Plant
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Investor Relations Contacts
Vice President, Investor Relations Senior Manager, Investor Relations Manager, Investor Relations
210.345.3077 210.345.4574 210.345.1953
john.locke@valero.com karen.ngo@valero.com tom.mahrer@valero.com
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