Sam Fletcher
OGJ Online
HOUSTON, June 20 -- Less than a month after taking possession of the El Paso Corp. refinery in Corpus Christi, Tex., in a $436 million lease-purchase deal, Valero Energy Corp. officials are making some low-cost moves to integrate its operations with their existing refinery nearby.
One of the first moves was to route some of Valero's excess benzene hardcut stream -- a mix of benzene and raffinate -- to the benzene, toluene, and xylene (BTX) unit at the El Paso facility. That material was previously being processed under a third-party agreement that expires at the end of this year.
At a rate of 3,500-5,000 b/d, that integration will save Valero some $4.5 million in outside processing charges and give back as much as $2 million worth of raffinate, "an ideal gasoline blending component," said John Hohnholt, vice-president of refining operations at Valero.
The El Paso refinery has excess BTX production capacity, while Valero was at the point of needing to increase its toluene production, said company officials, who see an additional savings there.
Valero also is routing coker gas oil from the El Paso plant, which has limited capacity for removing sulfur from that product, to the Valero refinery, where sulfur removal can enhance its value by 8¢/gal, Hohnholt said.
Integration of the two facilities is proving fairly easy because of their close proximity. "The distance between the two is about a mile at the widest point," Hohnholt said.
Valero is looking to reactivate three idle pipelines that connect its existing refinery with an old gas processing facility it once maintained on site at the refinery that El Paso obtained through its January acquisition of Coastal Corp. Additional lines may be added later as needed, said Valero officials.
The Valero and El Paso refineries are reverse images of each other, with each strong in areas where the other is weak. "It would be hard to find two other facilities that complement each other to the same degree," Hohnholt said.
Earlier this month, Valero signed 20-year capital leases for the El Paso refinery and product pipeline system in Corpus Christi. That refinery was the first purchased by Coastal in the early 1970s when LoVaca -- the forerunner of Valero -- was Coastal's intrastate natural gas pipeline division. LoVaca was separated from Coastal in 1979 to become Valero.
Under the lease-sale agreement, Valero will pay a lease of $18.5 million/year for the first 2 years, with an option to buy the facilities for $294 million at the end of the second year. Valero also paid El Paso $105 million for inventories and working capital.
Meanwhile, Valero plans to invest another $52 million to integrate the two refineries and to increase their combined throughput capacity to 380,000 b/d to form the fifth largest US refinery complex.
The El Paso refinery can process 110,000 b/d of heavy, high-sulfur crude, officials said. Some 70% of its current production is light products, including conventional gasoline, diesel, jet fuel, petrochemicals, propane, butane, and light naphthas. It also produces multiple grades of asphalt and petroleum coke. It is a highly complex facility with a Nelson index of 12, compared with a US average of 10.
Valero's existing Corpus Christi refinery is rated to process 94,100 b/d of crude. The bulk of the specialized plant was commissioned in 1983 and produces high-quality, premium products from low-value feedstocks -- primarily high-sulfur residual fuel oil, the bottom of the crude barrel.
The Valero facility is among the few US refineries that can channel its total gasoline run into production of reformulated gasoline; it's also one of the few outside of California that produces and sells CARB Phase II gasoline. It is a major producer of oxygenates such as methyl tertiary butyl ether and tertiary amyl methyl ether.
The El Paso refinery "is tight on hydroprocessing. We're long on hydroprocessing," Hohnholt said.
Valero officials said they will upgrade the El Paso refinery to process heavier crudes into more lucrative lighter products.
In a key move to expand capacity for sour crude processing at the El Paso refinery, officials plan to convert an underutilized visbreaker unit to process 75,000 b/d of sour crude for resid upgrading in Valero's existing system. "We're big on resid upgrading," Hohnholt told OGJ Online.
Workers also will expand a continuous catalyst regenerator reformer by 15,000 b/d, increasing octane production for greater output of premium, lower-sulfur boutique fuels.
"They're light on octane. We're long on octane. We can blend the two streams into our gasoline pools," Hohnholt said.
Full integration of the two facilities to allow blending of their separate gasoline and diesel runs will maximize synergy savings and reduce logistics costs, said Valero officials.
"Valero also will increase its jet fuel output through blending," said Hohnholt.
Valero officials are looking at restarting a propylene unit at the El Paso refinery that is shut down.
There are "a lot of other idle units" at the El Paso plant that can be used "to meet new or future specifications" for production of low-sulfur diesel, Hohnholt said.
By maximizing use of those idle or underutilized processing units, Valero officials said, they can increase yields of light products while avoiding third-party processing costs and reducing capital investment for Tier II gasoline specifications and ultra low-sulfur diesel.
"Our game plan is to do it all in about 2 1/2 years," said Hohnholt.
"The management at the corporate facility will run both plants," he said. Support services will be combined into a single group, with materials routed through a single warehouse.
Contact Sam Fletcher at [email protected]
