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© 2019 Valero. All rights reserved.
What’s Moving on the Waterways?Commodities Panel: PetroleumCraig Darilek, Sr. Manager Chartering
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Agenda
1 Valero Introduction
2 Petroleum Market Summary & Outlook
3 Petroleum Movements on Waterways
4 Challenges and Outlook
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Premier manufacturer, distributor, and marketer of transportation fuels and petrochemical feedstocks
15 petroleum refineries
3.1 million barrels per daythroughput* capacity
Manufacturer and marketer of
transportation fuels, petrochemical feedstocks, and other
specialty products ~6,000 employees
Safety is our foundation for success
Environmentally responsible operations
World’s 2nd
largest corn ethanol
producer
14 ethanol plants in the U.S. with a combined
production capacity of 1.7 billion gallons per year
~1,000 employees
Continued investment and growth in ethanol
business
World’s 2nd
largest renewable diesel producer
275 million gallons per year
Produces low-carbon
intensity renewable diesel from
recycled animal fats, used
cooking oil, and inedible corn oil
Planned expansion to 675 million gallons per year by late
2021
Low-carbon fuel well-positioned for export growth
Low-carbon fuel sold in California, Canada, and Europe
*in joint venture with Darling Ingredients Inc.
Largest global independent
refiner
Lowest-cost operator in the
industry 22% share of U.S. ethanol exports in
2018
100% compatible with existing engines
and infrastructure
*Processing of crude oil and other feedstocks
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CANADA
UNITEDSTATES
BENICIA
WILMINGTON
MCKEE
ARDMORE
THREE RIVERSBILL GREEHEY
(CORPUS CHRISTI EAST AND WEST)
TEXAS CITYHOUSTON
PORT ARTHUR
MERAUX
ST. CHARLES
MEMPHIS
MOUNT VERNON
LINDEN
BLOOMINGBURG
SAN ANTONIO
ALBIONAURORA
HARTLEY
WELCOME
ALBERT CITYFORT DODGE
CHARLES CITY
JEFFERSON
JEAN GAULIN(QUEBEC CITY)
14 VALERO ETHANOL PLANTS
15 VALERO REFINERIES
VALERO TERMINALS
VALERO OFFICES
RENEWABLE DIESEL PLANT
MONTREAL
SUNRAY WIND FARM
PERU LIMA
LONDONPEMBROKE
UNITEDKINGDOMIRELAND
RIGABLUFFTON
LAKOTA
VALERO HEADQUARTERS
4 COGENERATION PLANTS(EXISTING/UNDER CONSTRUCTION)
MEXICOMEXICO CITY
Our Operations
WHOLESALE MARKETING PRESENCE
4
5
6%
22%
53%
4%15%
PADD 1 PADD 2 PADD 3PADD 4 PADD 5
U.S. Distillation Capacity End-2018
Total 18.8 Million Barrels per Day
U.S. Refining Capacity – 18.8 MBPD in 2018Capacity focused in USGC and Mid-Con
Source: DOE
6
84
86
88
90
92
94
96
2011 2012 2013 2014 2015 2016 2017 2018 2019
U.S.
PADD 3 (USGC)
U.S. Refinery UtilizationU.S. refineries have been running harder, led by the USGC
U.S. Refinery Utilization(12 month moving average)
Refinery utilization moved higher starting in the middle of last year, USGC refineries supplying domestic demand and product exports to Latin America and Europe.
%
17.2 MBPD
9.3 MBPD
Source: EIA/DOE, Petroleum Supply Monthly (2019 through July)
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U.S. Gasoline + Diesel + Jet Demand(12 month moving average)
13.8
14.2
14.6
15.0
15.4
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
U.S. Transportation Fuels DemandRefineries running hard to supply fuels demand that has been rising
Source: EIA/DOE, for both historic data and forecast
U.S. transportation fuels demand has been structurally rising since earlier this decade.
Million barrels per day FORECAST
8
0.0
0.4
0.8
1.2
1.6
2.0
2.4
2.8
Other
Europe
Latin America (incl. Mexico)
U.S. Product ExportsLatin America is the primary destination for U.S. product exports
Gasoline, Diesel and Jet Gross Exports
Exports to Latin America have averaged over 1.9 million bpd over the first 7 months of this year, about 4x the level of a decade ago.
Million barrels per day
Source: EIA/DOE, Petroleum Supply Monthly (2019 through July) Data includes motor gasoline blending components
9
4
6
8
10
12
14
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Million Barrels per Day
Monthly U.S. Crude Production
U.S. Crude ProductionProduction has more than doubled in the last decade
FORECAST
Source: EIA/DOE, for both history and forecast
10
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2014 2015 2016 2017 2018 2019
Haynesville
Niobrara
Appalachia
Anadarko
Bakken
Eagle Ford
Permian
U.S. Crude ProductionProduction supported by large inventory of DUCs
Drilled But Uncompleted Wells (DUCs)
Permian
Source: EIA/DOE
DUC inventory buildup focused in the Permian, where they have doubled in the last two years (August 2017 vs. August 2019).
Eagle Ford
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U.S. Crude ExportsCrude exports up 850,000 bpd year-to-date
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2015 2016 2017 2018 2019To Canada To Europe To AsiaTo Other Regions Weekly Data Annual
Million Barrels per Day
2.00
2.85
Source: DOE/EIA exports by destination through Jul-19, Census Bureau for Aug-19, DOE/EIA weekly numbers for Sep-19
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Valero’s Use of Inland Waterways
SAN ANTONIO
MONTREAL
• 8 of 15 refineries on inland waterways, representing 1.7 million barrels per day capacity
• 9,800 Barge Transfers per year– Roughly 1 transfer per hour
• 2,800 Miles utilized• 65 Inland Marine Locations• 105 Segregated Products &
Feedstocks• 15.5 Million tons transported per year
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Percent Valero Movements by Product
Feedstocks41%
Blendstocks25%
Finished Products
25%
Crude2%
Aromatics / Gases
5%
Ethanol2%
• Finished product delivery a small part of barging activity
• Important to refinery optimization and system balancing
• Key resource during maintenance and turn-around activities
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Total Inland Trade
Petroleum Products 2017 Thousand BPD
Crude Petroleum 639 20%Gasoline 494 15%Kerosene / Distillate Fuel Oil 641 20%
Residual Fuel Oil & Asphalt/Tar/Pitch 532 16%
Lube Oil & Greases/Petrol Jelly 7 Wax/ Naphtha & Solvents 240 7%
Petro. Coke/Hydrocarbon & Petro Gases, Liquefied & Gaseous/Petroleum Products 286 9%Alcohols 180 6%
Benzene & Toluene / Other Hydrocarbons 213 7%Total Petroleum Products 3,225 100%
Reflects all waterborne commerce on inland waterways
Source: Army Corps of Engineers – Waterborne Commerce
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Petroleum Movements between PADDs a good measure of long-haul freight
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Inter-PADD movements - EC, GC & MW
Thousand Barrels per Day
Source: EIA/DOE
0
50
100
150
200
250
300
350
400
450
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Crude
Products
Excludes movements between EC & GC assumed to be coastwise
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Inter-PADD movements - EC, GC & MWThousand Barrels per Day
0
50
100
150
200
250
Crude Oil Products
Mainly Down River –PADD 2 to 3
Source: EIA/DOE
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Down River crude trade has revived
0
20
40
60
80
100
120
140
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Down RiverEast BoundWest Bound
Thousand Barrels per Day
Source: EIA/DOE
19
Slight decline in 2019 likely due to weather
-
20
40
60
80
100
120
140
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Products
Down River Up River East Bound
Thousand Barrels per Day
Source: EIA/DOE
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Down River Products – PADD 2 to 3
Residuals & Other30%
Ethanol & Renewables
28%
Feedstocks28%
Blendstocks10%
Gasolines4%
2018/2019 - 89 MBPD
Residuals & Other33%
Ethanol & Renewables
17%
Feedstocks37%
Blendstocks9%
Gasolines4%
2014 – 99 MBPD
0
5
10
15
20
25
30
35
40
14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18
Residuals & Other Ethanol & Renewables Feedstocks Blendstocks Gasolines
Thou
sand
BPD
Source: EIA/DOE
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Ethanol Exports have driven inland activity
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Up River Products – PADD 3 to 2
Distillates33%
Blendstocks20%
Feedstocks20%
Residuals & Other17%
Gasolines10%
2018/2019 – 56 MBPD
Distillates35%
Blendstocks31%
Feedstocks9%
Residuals & Other16%
Gasolines9%
2014 – 64 MBPD
-
5
10
15
20
25
30
35
14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18
Distillates Blendstocks Feedstocks Residuals Gasolines
Thou
sand
BPD
Source: EIA/DOE
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Challenges
• Waterway Infrastructure Maintenance– Though necessary, still disruptive
• Alleviated with planning good communication
• Lock Hot Spots – Brazos Flood Gates on Texas Coast• Continuous Operational Improvement
– Safety & Environmental
• Increased Labor Costs impact service sectors
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Overview of Petroleum Waterway Use
• Increased Crude Production Capacity
• Abundant Natural Gas– Methanol & Chemicals
• Petroleum Demand Growth– Trade policy resolution– Easing monetary policy
• IMO 2020– Refinery Rebalancing– New Fuel Segregation– Diesel Cracks
• Logistics Optimization– Location Exchanges– Pipeline Utilization
• Pipeline Infrastructure
Bullish Factors Bearish Factors
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Questions and Answers