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July 31, 2008 at 6:56 pm #3502
- <Valero really does need to bulldoze the Delaware Refinery fluid coker down & start all over – way too many crashes on this unit for it ever to be right, and enough lost profits as testimony! – CER>
Valero quarterly profit down 67% – Woeful results blamed on troubles at Delaware City refinery
By JEFF MONTGOMERY The News Journal July 30, 2008
Troubles at the Delaware City Refinery this spring bled millions from Valero Energy Corp.’s second-quarter profits, the company’s top officer said Tuesday.
Chief Executive Officer (CEO)Bill Klesse attributed a $35 million quarterly loss by the company’s three Northeast refineries “almost exclusively” to repair-related delays in the restart of Delaware City’s coker, a unit that processes bottom-of-the-barrel leftovers from other parts of the 210,000-barrel-per-day plant.
Northeast losses and high prices for crude oil and energy helped drag profits of the nation’s largest refiner down by 67 percent compared with 2007, the company reported. Unlike Exxon or other international energy firms, Valero is purely a refiner, forcing it to pay global prices for raw materials.
“Despite the difficult environment for margins on gasoline and many secondary products, Valero continued to be profitable,” Klesse noted. But Valero officials said that companywide net income from April 1 through June was off more than $1.3 billion, to $734 million, despite a $12.4 billion jump in revenues, from $24.2 billion in the second quarter of 2007 to $36.6 billion this year.
Higher prices for crude oil and other petroleum products and higher energy prices for electricity and natural gas chewed up much of the extra revenues. The company’s responses to the downturn disclosed Tuesday included a $700 million cut in capital spending this year.
Klesse later warned that proposed new national controls on carbon dioxide emissions, developed as part of an effort to reduce emissions of heat-trapping “greenhouse” gases, could further harm the industry and the economy.
“Long term, it’s just going to export refining jobs,” Klesse said. “If people are out of work, housing is still in the dumps and people start talking about this, they’d better make sure they understand what it’s going to do to the economy.”
Former Delaware City plant manager Andrew Kremer foreshadowed the quarterly results in June, when he told a legislative panel that the site was “under water” for the year and a poor target for new and potentially costly state-level controls on carbon dioxide.
Kremer, who left Delaware a few weeks later, said “you will see our funding stop” for additions and improvements in Delaware if the state applied a new kind of tax on CO2 releases to the refinery.
Those comments came after huge losses in Delaware during a major, plantwide power disruption in February and the discovery later of “one leak after another” in an important system used to burn waste gases to make steam for a 55,000-barrel-per-day unit that processes petroleum coke — a grainy leftover from other units.
“That impacted us tremendously,” Klesse said Tuesday. The same shutdown also deprived Delaware City of coker wastes normally burned as a fuel to make electricity, forcing the company to buy power from outside suppliers and creating what Klesse described as a “double whammy” for profits.
Northeast operations, which include refineries in Delaware City, Paulsboro, N.J., and Quebec, were the only ones to post a loss. The three sites recorded a $35 million loss for the quarter, in sharp contrast to the $523 million earned from operations across the Northeast in the second quarter of 2007. Counting the first quarter, losses are $30 million in the same region, compared with $812 million in profits for the first half of 2007.
Valero is the nation’s largest oil refiner, with 14 operations in the United States as well as a refinery in Canada and one in Aruba. Klesse said gasoline demand would continue its current decline if oil prices stay at $125 per barrel or more, and spoke out against the country’s continued 590,000-barrel-per-day use of ethanol as a fuel additive.
“That is taking market share from refiners at a huge cost to the world and U.S. taxpayer,” Klesse said, referring to American subsidies that have diverted food grains into fuel production, driving up food prices around the world.
Contact Jeff Montgomery at 678-4277 or email@example.com.
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