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Refining 101

July 6, 2010
Safe Harbor Statement
Statements contained in this presentation that state the Company’s or
management’s expectations or predictions of the future are forward–
looking statements intended to be covered by the safe harbor provisions
of the Securities Act of 1933 and the Securities Exchange Act of 1934.
The words “believe,” “expect,” “should,” “estimates,” and other similar
expressions identify forward–looking statements. It is important to note
that actual results could differ materially from those projected in such
forward–looking statements. For more information concerning factors
that could cause actual results to differ from those expressed or
forecasted, see Valero’s annual reports on Form 10-K and quarterly
reports on Form 10-Q, filed with the Securities and Exchange
Commission, and available on Valero’s website at www.valero.com.

2
Rich Marcogliese

Executive Vice President


and
Chief Operating Officer

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Crude Oil Characteristics
• Crudes are classified and priced by density and sulfur content
• Crude density is commonly measured by API gravity
– API gravity provides a relative measure of crude oil density
– The higher the API number, the lighter the crude
• Light crudes are easier to process
• Heavy crudes are more difficult to process
• Crude sulfur content is measured as a percentage
– Less than 0.7% sulfur content = sweet
– Greater than 0.7% sulfur content = sour
– High sulfur crudes require additional processing to meet regulatory specs
• Acid content is measured by Total Acid Number (TAN)
– Acidic crudes highly corrosive to refinery equipment
– High acid crudes are those with TAN greater than 0.7

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Crude Oil Basics
Crude Oil Quality by Types
4.0%
Cold Lake Estimated Quality of Reserves (2009)
3.5% Cerro Negro
SOUR

Maya
WCS
3.0%
M-100 (resid) Arab Heavy Sweet
High Acid
SULFUR CONTENT

2.5% Arab Medium


(Sweet) 21%
Napo Dubai 2% Light/Medium
2.0% Mars
Iran Heavy Arab Light Sour
Ameriven-
1.5% Hamaca Urals
14%
Heavy 63%
Alaskan North
SWEET

1.0% Slope
Sour

0.5% WTI
Brent
Tapis
Cabinda Bonny Light
0.0%
15 20 25 30 35 40 45 50
Source: DOE, Oil & Gas Journal, Company Information
HEAVY API GRAVITY LIGHT
Source: Industry reports

• Majority of global crude oil reserves are sour


• Most quoted benchmark prices are light sweet crude oils
– WTI (West Texas Intermediate), Western Hemisphere
– Brent (North Sea Crude), Europe
– Tapis/Oman (Middle East), Asia Pacific
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What’s in a Barrel of Crude Oil?
Crude Oil Types Characteristics Inherent Yields
3%
2009 U.S. Refinery
> 34 API Gravity Production
Light Sweet 32%
< 0.7 % Sulfur
(e.g. WTI, LLS, Brent) Propane/
Refinery
30% 8%
9% Butane
35% Demand Gases

Most Expensive 35%


Gasoline
RFG
46% Conventional
24 to 34 API Gravity
2% CARB
Premium
Medium Sour 24%
> 0.7 % Sulfur
(e.g. Mars, Arab Light, 26%
Arab Medium, Urals) 50% Demand
36% Distillate
Less Expensive 48% Jet Fuel
Diesel
Heating Oil

< 24 API Gravity 1%


15% Heavy Fuel
> 0.7 % Sulfur 21% 9% Oil & Other
Heavy Sour
(e.g. Maya, Cerro Negro, Cold Lake, 15% Demand
Western Canadian Select) Least Expensive 63% Source: EIA Refiner Production

Refineries upgrade crude oil into higher value products 6


Basic Refining Concepts
Intermediates Final Products
< 90°F Propane, Butane and • Refinery fuel gas
C1 to C4 lighter • Propane
• NGLs
90–220 F Straight Run More
Gasoline (low • Gasoline (high octane)
C5 to C8 processing
octane)
Crude oil
220–315°F More • Gasoline (high octane)
Naphtha
Distillation C8 to C12 processing • Jet fuel
Tower
(Crude • Kerosene
Unit) 315–450°F More • Jet fuel
Kerosene
C12 to C30 processing • Diesel
• Fuel oil

More • Gasoline (high octane)


450–650°F Light Gas Oil
Furnace • Diesel
processing
C30 to C50+ • Fuel oil

More • Gasoline (high octane)


650–800°F Heavy Gas Oil • Diesel
Vacuum C 30 to C50+ processing • Fuel oil
Unit
• Gasoline (high octane)
800+°F Residual Fuel More • Diesel
Oil/Asphalt processing • Fuel oil
C50 to C100+
• Lube stocks 7
Hydroskimming/Topping Refinery

Propane/
4% Butane

Gasoline
Low Octane Gasoline and RFG
Naphtha 32% Conventional
Distillation Tower

CARB
Premium
Light
Sweet LS Kerosene/Jet Fuel
32% Distillate
Jet Fuel
Crude Diesel
Heating Oil

Heavy Fuel
Oil & Other
32%

100% Total Yield


Simple, low upgrading capability refineries run sweet crude 8
Crude and Vacuum Towers

Reactor

Heater

Crude Atmospheric Tower Vacuum Tower Reformer


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Medium Conversion: Catalytic Cracking

Propane/
8% Butane

Gasoline
RFG
Low Octane Gasoline and 45% Conventional
Naphtha CARB
Distillation Tower

Premium

Light LS Kerosene/Jet Fuel


Distillate
31%
Sour LS Diesel/Heating Oil
Jet Fuel
Diesel
Crude Heating Oil

Heavy Fuel
Oil & Other
20%

104% Total Yield


Moderate upgrading capability refineries tend to run more sour crudes while
achieving increased higher value product yields and volume gain 10
High Conversion: Coking/Resid Destruction

Propane/
7% Butane

Gasoline
RFG
Low Octane Gasoline and High Octane Gasoline 50% Conventional
Distillation Tower

Naphtha CARB
Medium/ Premium

Heavy 36% Distillate


HS Kerosene/Jet Fuel LS Kerosene/Jet Fuel
Sour Jet Fuel
Diesel
Crude HS Diesel/Heating Oil LS Diesel/Heating Oil Heating Oil

Heavy Fuel
Oil & Other
15%

108% Total Yield


Complex refineries can run heavier and more sour crudes while achieving the highest light
product yields and volume gain 11
FCC and Hydrocracker Reactors
Fluidized Catalytic Cracker
Reactor Hydrocracker Reactors

Main Column Regenerator


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Coker – Thermal Cracker

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Cokers
Delayed Coker
Superstructure holds the drill and drill stem while
Fluid Coker
the coke is forming in the drum

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Conversion Economics
$/Bbl 6-3-2-1 Crack Spread
45
40
35
30
25
20
15
10
5
0
-5
Jan-04Jul-04 Jan-05Jul-05 Jan-06Jul-06 Jan-07Jul-07 Jan-08Jul-08 Jan-09Jul-09 Jan-10
LLS (Light Sweet) Mars (Medium Sour) Maya (Heavy Sour)
• Need conversion capacity to capitalize on sour crude oil differentials
– Hydroskimming – Breakeven or moderate margins; High resid yield
• When margins are positive – increase crude oil runs
• When margins are negative – decrease crude oil runs
– Cracking – Better margins; Lower resid yield
– Coking – Best margins; Lowest resid yield
• Maximize heavy crude oils 15
Desulfurization Basics
Objective
• Remove sulfur from light products (gasoline or diesel) to meet air quality requirements for clean burning fuels
• Units are called desulfurization or hydrotreater

Desulfurization Unit
HC Desulfurized Light Products
High Sulfur HC-S H2 HC-S
Light Products HC-S
H2
(HC-S) H2 Elemental
Catalyst
Sulfur Plant Sulfur
HC-S HC-S • Agricultural
H2S S S S
H2 HC-S S • Pharmaceutical
S S

Hydrogen Unit
H2 LEGEND
H2 H2
HC : Hydrocarbon
H2 H2 1000 or less PSI; H2 : Hydrogen
H2
700 F or less
S : Sulfur

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Hydrotreating Catalysts

1/2” Active Cage Traps

1/4” Trilobe Extrudate Arsenic Trap

1/4” Cylinder Traps

3/16” Cylinder Traps

5/32” Cylinder Traps

1/8” Trilobe Cobalt Molybdenum Catalyst


3/32” Trilobe Cobalt Molybdenum Catalyst
1/8 ” Trilobe Nickel Molybdenum Catalyst
3/32 ” Trilobe Nickel Molybdenum Catalyst

1/8” Ceramic Balls

1/2” Ceramic Balls

1/4” Ceramic Balls

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Hydrocracking Basics
Objective
• Value added upgrading of high sulfur distillates to low sulfur gasoline and ultra low sulfur jet/diesel to meet air
quality requirements for clean burning fuels
• Typically achieve 20% to 30% volume expansion due to hydrogen saturation

Hydrocracking Unit HC Desulfurized Hydrocrackate Gasoline


High Sulfur HC-S H2 HC-S
Distillate HC-S H2 H2
H2 HC Desulfurized Ultra Low Sulfur Jet/Diesel
H2
(HC-S) Catalysts H2 Elemental
H2
HC-S H2 H2 HC-S Sulfur Plant Sulfur
• Agricultural
H2 H2S S S S
HC-S S • Pharmaceutical
S S

Hydrogen Unit
H2
H2 H2 LEGEND
H2 1300+ PSI; HC : Hydrocarbon
H2 H2
725 to 780 F H2 : Hydrogen
S : Sulfur
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Hydrocrackers

McKee Hydrocracker Corpus Christi Hydrocracker


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Q&A

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Appendix

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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 thru application of heat (thermal) or through 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 surrounding 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 with 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
blending stock.
– 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
parafins, which reduces gum formation in fuels. Hydroprocessing also cracks
heavier products to lighter, more saleable products.

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List of 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 Oxygen 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 26