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Join Date: May 2007
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An interesting article on a smal consideration in the Refinery Business below.
You have to keep in mind that Valero's Aruba refinery handles heavy sour crude and not light sweet crude. Mexico and Venezuela are abundant in heavy sour, whereas the Mid- East offers light sweet.
Gasoline is much easier produced from light sweet, whereas, the heavy sour refined in Aruba is as far as I know, mainly jet fuel and diesel. If I am wrong, I am sure to stand corrected.  
Valero trading room grapples with 'Feeding the Beast'
Midland Reporter-Telegram 07/15/2006
San Antonio Express-News
SAN ANTONIO -- On the sprawling trading-room floor at Valero Energy Corp.
's headquarters, planners, traders and their bosses grapple every day with a task they call "feeding the beast."
Valero's 18 refineries chew through 3.3 million barrels of crude oil a day, oil that the San Antonio-based company buys from around the world.
Purchasing the oil at the best possible price and getting the right type of crude oil to the proper refinery is a daily high-wire act that is all but unknown to motorists. They just want to pull up to the pump and have the fuel available at a reasonable price.
But anyone visiting Valero's trading room gets a feel for the complexity of shipping crude oil to refineries and fuel to pumps. Recently, Joe Gorder, executive vice president of marketing and supply, led Valero's early morning dance, assessing how the beast was being fed. He heard of a litany of glitches.
A lightning strike that caused a brief power outage at one plant. A power surge at another. Repairs still under way at a Louisiana refinery. Delays getting vessels through the Panama Canal, but they weren't too bad.
Talk of ethanol, which is blended with gasoline to be sold in certain cities, took over the meeting. Valero is having to ship ethanol by truck all the way from Colorado to blend with fuel in North Texas.
The good news: A railroad track washed out by New Jersey floods won't affect Valero's two plants in the Northeast. It's using barges to ship the ethanol in that part of the country.
"We're very OK on ethanol" there, Gorder was told.
Valero has made a healthy profit shipping diesel to the Midwest, but there's no easy way to transport more for now, Gorder learned. Another company's massive ship is having problems unloading in the Caribbean. Valero will send a smaller vessel to transfer some crude to ship to its New Jersey refinery. The one thing that Valero wants to avoid is running short of crude oil at a refinery.
"What's going to keep you guys awake tonight?" Gorder asks near the end of the 50-minute meeting.
No one looks uncomfortable. The beast is getting fed.
Valero buys from sources large and small, with about 65 percent of the crude oil purchased through term contracts and most of the rest on the spot market.
"We buy crude oil by the truckload from a lease in Ochiltree or Lipscomb County (in Texas) -- it could be 150 barrels -- to 2.2 million barrels from the
Middle East that's loaded aboard a VLCC (very large crude carrier)," said Bob
Beadle, Valero's senior vice president of crude and feedstock supply and trading. "There's not a region in the world where we don't buy."
Valero obtains about one-fourth of its crude oil from domestic sellers.
Internationally, it makes its biggest buys from Mexico, Saudi Arabia, Iraq, Kuwait, Venezuela, Ecuador and several African nations, according to company documents.
Valero also has bought crude oil from China and Indonesia. But that doesn't happen often because "China sucks up most of the oil from Indonesia," Beadle said, and China usually doesn't have spare crude oil to export.
Getting the crude oil to Valero's refineries, which stretch from Canada to the East and West Coast of the United States and the Gulf Coast and the Caribbean, presents constant logistical challenges.
Ships carrying crude oil bound for Valero's plants "are like ducks in a shooting gallery at the state fair," Beadle said. They just keep coming. It can take as long as 45 days for a ship bearing crude oil to arrive at the Texas Gulf Coast. It's the job of Valero planners to direct the flow of crude oil and decide which Valero plants are best for processing them. The process is made more complex because Valero's refineries are processing at least two to three different types of crude most days.
Sometimes it behooves Valero to shift a shipment of crude to a different refinery because processing at the second plant "could mean 10 cents more a barrel," Beadle said.
The day for Beadle and Gorder begins about 6:15 a.m., when they arrive at work and check on the commodities reports from London. Valero's planners huddle at 7:30 to talk about what's needed at each refinery. They use a sophisticated computer model that helps them determine what type of crude should be processed where.
Geopolitics also are discussed at daily meetings, because about 40 percent of Valero's oil is purchased from politically unstable nations.
And at any one time, Valero has more than 200 million barrels of price exposure "just to run our business," Beadle says. "So risk management is very important."
Because Valero buys about 4 percent of the 84 million barrels of crude oil that the world uses every day, the company is well known in the energy world.
Then there's the sell side. Valero's plants churn out more than 1.4 million barrels of gasoline a day and about 1.1 million gallons of products called distillates that include diesel and jet fuel. A significant amount of the product is sold on the spot market, Gorder said.
Valero's sales aren't executed by frenzied, testosterone-fueled traders holding a phone to each ear, but there's a quiet intensity on the trading-room floor. And things can get crazy when there's a major interruption in supply, such as after Hurricane Katrina ripped though the Gulf of Mexico.
Valero's traders -- it employs about 50 -- are highly compensated.
It's a job that requires a person with a special set of skills and "it knows no age or gender," Beadle said. The ideal trader, he said, would have a technical degree in a field such as chemical engineering (they need to know a lot about feedstocks), along with an MBA.
Some fail at trading, Gorder said, because "they can't pull the trigger. In this business, not making a decision is making a decision. You have to be able to execute."
Last edited by Arubalisa; 03-23-2008 at 07:59 PM.
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