Valero halts two US hydrocracker projects

By OGJ editors
HOUSTON, June 4 -- Valero Energy Corp. has suspended plans to add hydrocrackers at two US refineries, citing its agreement to acquire a major refining interest in the Netherlands.

Valero Chairman and Chief Executive Officer Bill Klesse said the company is "indefinitely postponing our major new hydrocracker projects at St. Charles and Port Arthur."

At the 250,000-b/d Port Arthur, Tex., refinery, Valero had planned to add a 50,000-b/d hydrocracker at an estimated cost of $1.7 billion. The project was expected to add as much as 75,000 b/d of distillation capacity through debottlenecking.

In a $1.25-billion project at the 310,000-b/d St. Charles, La., refinery, Valero planned a new 50,000-b/d hydrocracker.

It had earlier announced delays in both hydrocracker projects.

Klesse linked the postponements to Valero's recent agreement to acquire Dow Chemical Co.'s 45% interest in Total Raffinaderij Nederland NV (TRN) for $752 million (OGJ Online, May 26, 2009). TRN owns a 190,000-b/d refinery in Vlissingen with 68,000 b/d of hydrocracking capacity.

"In the current environment, it makes more sense to acquire existing capacity at a substantial discount to new construction costs," he said.

In the TRN deal, Klesse said, "we believe the purchase price is less than 50% of replacement cost for this world-class distillate hydrocracking facility."

In March, Valero won a bid to buy five ethanol plans plus one under development from bankrupt VeraSun Energy Corp. at a price it estimated to be 30% of replacement cost. It agreed to pay $477 million for total ethanol production capacity of 780 million gal/year.

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