Valero reduces refinery throughputs, warns of project delays

Valero Energy Corp. said it has reduced crude oil processing activities and expects to delay previously anticipated capital expenditures planned in 2020 for its refining and ethanol segments amid reduced demand for finished petroleum products as a result of the coronavirus (COVID-19) outbreak.

“In late March and through early April 2020, we started reducing the amount of crude oil processed at most of our refineries in response to the decreased demand for our products; we temporarily idled various gasoline-making units at certain of our refineries to further limit gasoline production, and we took measures to reduce jet fuel production. We also temporarily idled eight of our ethanol plants, and we reduced the amount of corn feedstock processed at our remaining six ethanol plants to address the decreased demand for ethanol,” Valero said in an Apr. 13 filing to the US Securities and Exchange Commission.

The company disclosed neither locations of the refineries impacted by throughput reductions nor the rates by which units were slowed.

Alongside deferring tax payments due in 2020 as well as securing a new $875-million, 364-day revolving credit agreement, the operator said it also plans to defer or delay certain capital investments related to its refining and ethanol businesses originally scheduled for 2020.

“Many uncertainties remain with respect to COVID-19, including its resulting economic effects, and we are unable to predict the ultimate economic impacts from COVID-19 and how quickly national economies can recover once the pandemic subsides. However, the adverse impact of the economic effects on the [c]ompany has been and will likely continue to be significant. We believe we have proactively addressed many of the known impacts of COVID-19 to the extent possible and will strive to continue to do so, but there can be no guarantee that these measures will be fully effective,” Valero said.

While Valero did not identify specific projects in the SEC filing to be deferred or delayed as part of its pandemic-response business measures, the operator told investors in a March presentation that it planned to advance a number of projects during 2020 designed to improve refining margins, production, and operations. Major investments planned during 2020 included:

• A $975-million project for a 55,000-b/d delayed coker and sulfur recovery unit scheduled for startup in 2022 at company’s 335,000-b/d refinery in Port Arthur, Tex.
• A $400-million project to add a 17,000-b/d alkylation unit for planned startup in fourth-quarter 2020 at the operator’s 215,000-b/d St. Charles refinery in Norco, La. (OGJ Online, Apr. 25, 2019).
• A $550-million project to add a second renewable diesel production train for commissioning in 2021 at the Valero-Darling Ingredients Inc. 50-50 joint venture Diamond Green Diesel Holdings LLC’s renewable diesel plant at Norco to expand production capacity to about 675 million gal/year from 275 million gal/year (OGJ Online, May 6, 2019).

Diamond Green Diesel also began advanced engineering and development cost review in late 2019 for a 400 million-gal/year renewable diesel plant in Port Arthur, a project on which final investment decision was previously scheduled for 2021 (OGJ Online, Sept. 9, 2019).