Valero: ‘We’re Not Going Away’


Valeros API Group I base oil plant in Paulsboro, N.J., is not going out of business, a company executive said. Valero has multiyear contract commitments to continue operating the business.

Industry consultants – most recently Amy Claxton of My Energy at the early December ICIS Pan-American Base Oils & Lubricants Conference in New York – have predicted that North American Group I plants are vulnerable to closure in the coming years. Claxton concluded that Valeros 11,500 barrel per day refinery in Paulsboro, together with Sunocos Tulsa plant and, to a lesser extent, ExxonMobils and Shells North American Group I plants, are the most likely shutdown candidates.

Its not true, at least not in the next five years, said Terrence A. Hoffman, Valeros director of base and process oil sales in San Antonio, Texas. We have a commitment from management to continue to operate the business, as long as theres no significant unexpected event. Hoffman noted that an event like a fire, explosion or tornado could create a major capital obligation.

While the Paulsboro refinery does not make wax, Hoffman said, it produces high value bright stock as well as kerosene. Low-sulfur kerosene can sell at a $10 per barrel premium to ultra-low sulfur diesel, he noted. Another byproduct Valero produces is aromatic extracts, used by the rubber industry.

And rather than look only at how a Group I plant fits into its parent companys total portfolio, said Hoffman, its important to determine how strategic the base oil operation is to its refinery. In Paulsboro, wed have to spend a lot to shut down the lube plant. If you shut one conversion unit, you need to replace it with another, he said.

The Paulsboro lube plant is a better asset to Valero than any other option for the refinery, Hoffman concluded. Its the most profitable operating mode for Valero.

Valero acquired the Paulsboro refinery, including the base oil plant, from Mobil in September 1998. According to news reports at the time, Mobil signed 10-year agreements to buy fuels and lube base stocks from the plant. The plant has capacity to make 11,000 b/d of Group I and 500 b/d of Group II base stocks.

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