St.

Charles Refinery Tour

April 6, 2008

Management Presentation

Agenda Basics of Refining St. Charles Refinery Operations Q&A Plant Tour Concluding Remarks

Gary Simmons
Vice President Planning and Economics

Crude Oil Characteristics

Crude oils are classified and priced by density and sulfur content Crude oil density is commonly measured by API gravity
API gravity provides a relative measure of crude oil density The higher the API number, the lighter the crude oil

Light crude oils are easier to process Heavy crude oils are more difficult to process

Sulfur content is measured as a percentage

Less than 0.7% sulfur content = sweet Greater than 0.7% sulfur content = sour High sulfur crude oils require additional processing to meet regulatory specs

Acid content is measured by Total Acid Number (TAN)

Acidic crude oils are highly corrosive to refinery equipment High acid crude oils are those with TAN greater than 0.7
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Crude Oil Basics

4.0%
SOUR

Crude Oil Quality by Types

Cold Lake Cerro Negro Maya WCS

Estimated Quality of Reserves (2007)

3.5% 3.0%

SULFUR CONTENT

M-100 (resid) 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 15

HEAVY

Arab Heavy Arab Medium

Sweet High Acid (Sweet) 1%

19%

Napo Iran Heavy Ameriven-Hamaca 2000 Alaskan North Slope

Dubai Mars Arab Light 2010 Urals 1990 1980 Brent Cabinda Bonny Light 35 40 WTI Tapis 45
LIGHT

Light/Medium Sour
14% 66%

Heavy Sour

SWEET

20

25

30

50

Source: DOE, Oil & Gas Journal, Company Information

API GRAVITY

Source: Industry reports NOTE: Red line represents the average crude oil quality by decade (actual and projected)

Majority of global crude oil reserves are light/medium sour Most quoted benchmark prices are light sweet crude oils
WTI (West Texas Intermediate), Western Hemisphere Brent (North Sea Crude), Europe

Historical trend shows global crude oil supply becoming heavier and more sour
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Whats in a Barrel of Crude Oil?

Crude Oil Types Characteristics
> 34 API Gravity

Yields
3%

2006 U.S. Production

8% 8%
Propane/ Refinery Butane Gases Gasoline RFG Conventional CARB Premium

Light Sweet
(e.g. WTI, LLS, Brent)

32% 30% 35%

< 0.7 % Sulfur 35% Demand Most Expensive

24 34 API Gravity

2% 24%

49%

Medium Sour
(e.g. Mars, Arab Light, Arab Medium, Urals)

> 0.7 % Sulfur 50% Demand Less Expensive

26%

48%

33%

Distillate Jet Fuel Diesel Heating Oil

< 24 API Gravity

1% 15%

Heavy Sour
(e.g. Maya, Cerro Negro, Cold Lake, Western Canadian Select)

> 0.7 % Sulfur 15% Demand Least Expensive

21%

10%

Heavy Fuel Oil & Other

63%

Source: EIA Refiner Production

Refineries upgrade crude oil to higher value products

Basic Refining Concepts

Intermediates
< 90F

Final Products
Refinery fuel gas Propane NGLs
More processing

Propane, Butane and lighter Light Straight Run Gasoline (low octane)

90220F

Gasoline (high octane)

Crude oil
220315F

Naphtha

More processing

Distillation Tower (Crude Unit)

Gasoline (high octane) Jet fuel Kerosene Jet fuel Diesel Fuel oil Gasoline (high octane) Diesel Fuel oil Gasoline (high octane) Diesel Fuel oil Gasoline (high octane) Diesel Heavy Fuel Oil, Asphalt Lube stocks

315450F

Kerosene

More processing

Furnace

450650F

Light Gas Oil

More processing

650800F

Heavy Gas Oil

More processing

Vacuum Unit
800+F

Resid, Pitch

More processing

Hydroskimming/Topping Refinery
Crude Unit Propane/Butane

4%

Propane/ Butane Gasoline RFG Conventional CARB Premium

Distillation Tower

Low Octane Gasoline and Naphtha

Reformer

High Octane Gasoline

30%
Hydrogen

Light Sweet Crude Oil

HS Kerosene/Jet Fuel

Distillate Desulfurizer

LS Kerosene/Jet Fuel

HS Diesel/Heating Oil

LS Diesel/Heating Oil

34%

Distillate Diesel Heating Oil Jet Fuel

Vacuum Unit

Gas Oil

32%
Heavy Fuel Oil / Resid

Heavy Fuel Oil & Other

100% Total Yield

Simple, low upgrading capability refineries run light sweet crude oil, yet produce a high 7 yield of heavy fuel oil and resid

Medium Conversion: Catalytic Cracking

Crude Unit Propane/Butane

8%

Propane/ Butane Gasoline RFG Conventional CARB Premium

Distillation Tower

Low Octane Gasoline and Naphtha

Reformer

High Octane Gasoline

45%

Hydrogen

Light Sour Crude

HS Kerosene/Jet Fuel HS Diesel/Heating Oil

Distillate Desulfurizer

LS Kerosene/Jet Fuel

LS Diesel/Heating Oil

27%

Distillate Diesel Heating Oil Jet Fuel

Light Cycle Oil (LCO) Alkylation Unit

Vacuum Unit

Gas Oil

Fluid Catalytic Cracker (FCC)

Alkylate

FCC Gasoline

24%
Heavy Fuel Oil / Resid

Heavy Fuel Oil & Other

104% Total Yield

Refineries with moderate upgrading capabilities tend to run more sour crude oils while increasing yields of higher value product and experiencing volume gain
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High Conversion: Coking/Resid Destruction

Crude Unit Hydrogen Plant Gas

7%
Propane/Butane

Propane/ Butane Gasoline RFG Conventional CARB Premium Distillate Jet Fuel Diesel Heating Oil

Distillation Tower

Low Octane Gasoline

Reformer

High Octane

58%

Medium/ Heavy Sour Crude Oil

Hydrogen

Kerosene

Distillate Desulfurizer

Kerosene/Jet Fuel

28%
Diesel/Heating Oil

Diesel

Light Gas Oil

Hydrocracker

Hydrocrackate Gasoline Ultra Low Sulfur Jet/Diesel

LCO Fluid Catalytic Cracker (FCC)

Alkylation Unit

Alky Gasoline

Vacuum Unit

Medium Gas Oil

FCC Gasoline

15%
Heavy Fuel Oil Delayed Coker Coke

Heavy Fuel Oil & Other

108% Total Yield

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Complex refineries can run heavier and more sour crude oils while achieving the highest yields of light products and greatest volume gain

Conversion Economics
U.S. Gulf Coast Refinery Margins
30 25 20 15 US$/Bbl 10 5 0 (5) (10) Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Arab Medium Hydroskimming

LLS Cracking

Maya Coking

Need conversion capacity to capitalize on sour crude oil differentials

Hydroskim Breakeven or moderate margins; High resid yield

When margins are positive increase crude oil runs When margins are negative decrease crude oil runs

Cracking Better margins; Lower resid yield Coking Best margins; Lowest resid yield

Maximize heavy crude oils

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Comparison of Conversion Capacity

MBPD

1,800 1,600 1,400 1,200

U.S. Conversion Capacity1

Cat Cracking Hydrocracking Coking

1,000 800 600 400 200 0

VLO

XOM

COP

BP
1

CVX

RDS

MRO

TSO

SUN

Source: Oil & Gas Journal, Company Websites

Conversion Capacity = Sum of Coking, Hydrocracking and Cat Cracking Capacity

Valero is an industry leader in upgrading capacity Valeros upgrading capacity provides superior operational flexibility Significant capital investment and long lead time required to add conversion capacity
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Ralph Phillip
Vice President and General Manager St. Charles Refinery

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Valero St. Charles Refinery

Commissioned in the 1930s Acquired by Valero on July 1, 2003. Over $3 billion in upgrades over the past 10 years, $1 billion since Valero acquisition Located on 1,000 acres adjacent to the Mississippi River with strategic feedstock and product transportation corridors Owns and operates five docks on the Mississippi River Connected to the LOOP Crude delivery system and the Colonial products pipeline system Heavy Sour Crude Facility with nearly 80% of the finished products shipped as Gasoline, ULSD, and other light products Throughput capacity of 250 MBPD total feedstocks 13

Valero St. Charles Refinery

Staffed with nearly 600 full-time employees and 200 continuing service contractors Recognized as an OSHA Voluntary Protection Program Star Site Received OSHA VPP Star Among Stars Status in 2006-2007 Received Valero Chairmans Safety Award in 2005 and 2007 Received Valero Chairmans Environmental Award in 2004

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St. Charles Products and Feedstock Slate

Typical Product Slate
Product Gasoline Ultra Low Sulfur Diesel High Sulfur VGO Alkylate Propylene Slurry (Fuel Oil) Mixed LPG Propane MBPD 85 72 40 17 9 7 4.5 0.3 % 36 31 17 7 4 3 2 0 100 <1 <1 Total LCO Total Naphtha Total Butylene Total 0.85 / 18.5 0.03 / 60 5 3 3 231 2 1 1 100 15 LSVGO LSATB Total Cat Feed 0.4 / 24.5 0.5 / 22.5 45 15 60 19 6 26 Maya M-100 Mars Total Crude

Typical Feedstock Slate

Crude S % / API 3.6 / 20.3 2.4 / 14.5 1.9 / 30.3 MBPD 85 65 10 160 % 37 28 4 70

Total Liquid Products

Pet Coke (Tons/day) Sulfur (Tons/day)

235
3,900 450

St. Charles Capital Investments

Over $1,000 MM invested in capital improvements and $130 MM for turnaround maintenance at St. Charles since Valeros acquisition. Another $3,000 MM is approved for completion prior to the end of 2010. Crude/Vacuum/Coker 40 MBPD crude capacity increase

Completed in 2004 Started up in 2005 New 650# Boiler in 2005 Refinery water system in 2007 Started up in 2007 Started up in 2007 New Laboratory in 2005 New East plant control room in 2007 New Maintenance facility in 2008

Gasoline Desulfurization Unit 60 MBPD Capacity

Utility Systems Upgrades

HT/HC Combination Unit 58 MBPD Capacity

SMR Hydrogen Units 100 MMSCFD Capacity

Facilities Upgrades

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St. Charles Capital Investments

$1.4 Billion Refinery Upgrade and Expansion New 50,000 BPD Gas Oil Hydrocracker 45,000 BPD Crude Expansion to 235,000 BPD 10,000 BPD Coker Expansion to 80,000 BPD Increases ULSD production by 49,000 BPD Target 2Q 2010 Completion $2 Billion CCR/Aromatics Complex New 75,000 BPD Continuous Catalytic Reformer Upgrades Naphtha from Valero Hydrocrackers Produces 33,000 BPD Para-xylene Produces 17,000 BPD Benzene Target 1Q 2011 Completion Positions refinery for long term competitiveness
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Appendix

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St. Charles Refinery Flow Diagram

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Optimizing Refining Portfolio

Benicia, California 170,000 bpd capacity 15.0 Nelson complexity Quebec, Canada 215,000 bpd capacity 7.8 Nelson complexity

Paulsboro, New Jersey 195,000 bpd capacity 9.1 Nelson complexity

Wilmington, California 135,000 bpd capacity 15.9 Nelson complexity

Delaware City, Delaware 210,000 bpd capacity 13.2 Nelson complexity

McKee, Texas 170,000 bpd capacity 9.4 Nelson complexity

Lima, Ohio 165,000 bpd capacity SOLD in 2007

Three Rivers, Texas 100,000 bpd capacity 12.4 Nelson complexity Corpus Christi, Texas 315,000 bpd capacity 18.4 Nelson complexity Texas City, Texas 245,000 bpd capacity 10.8 Nelson complexity Houston, Texas 145,000 bpd capacity 15.1 Nelson complexity Krotz Springs, Louisiana 85,000 bpd capacity 6.5 Nelson complexity Under Strategic Evaluation

Memphis, Tennessee 195,000 bpd capacity 7.5 Nelson complexity Under Strategic Evaluation

Ardmore, Oklahoma 90,000 bpd capacity 10.9 Nelson complexity

St. Charles, Louisiana 250,000 bpd capacity 14.3 Nelson complexity

Legend
Core Refinery

Valero Marketing Presence

Port Arthur, Texas 310,000 bpd capacity 11.8 Nelson complexity

San Nicholas, Aruba 275,000 bpd capacity 7.0 Nelson complexity Under Strategic Evaluation

Non-Core Refinery Under Strategic Evaluation

Capacity shown in terms of crude and feedstock throughput Source: Nelson complexities, Oil & Gas Journal and Valero estimates

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Major Refining Processes Crude Processing

Definition
Separating crude oil into different hydrocarbon groups The most common means is through distillation

Process
Desalting Prior to distillation, crude oil is often desalted to remove corrosive salts as well as metals and other suspended solids. Atmospheric Distillation Used to separate the desalted crude oil into specific hydrocarbon groups (straight run gasoline, naphtha, light gas oil, etc.) or fractions. Vacuum Distillation Heavy crude residue (bottoms) from the atmospheric column is further separated using a lowerpressure distillation process. Means to lower the boiling points of the fractions and permit separation at lower temperatures, without decomposition and excessive coke formation.

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Major Refining Processes Cracking

Definition
Cracking or breaking down large, heavy hydrocarbon molecules into smaller hydrocarbon molecules thru application of heat (thermal) or through the use of catalysts

Process
Coking Thermal noncatalytic cracking process that converts low value oils to higher value gasoline, gas oils and marketable coke. Residual fuel oil from vacuum distillation column is typical feedstock. Visbreaking Thermal noncatalytic process used to convert large hydrocarbon molecules in heavy feedstocks to lighter products such as fuel gas, gasoline, naphtha and gas oil. Produces sufficient middle distillates to reduce the viscosity of the heavy feed. Catalytic Cracking A central process in refining where heavy gas oil range feeds are subjected to heat in the presence of catalyst and large molecules crack into smaller molecules in the gasoline and surrounding ranges. Catalytic Hydrocracking Like cracking, used to produce blending stocks for gasoline and other fuels from heavy feedstocks. Introduction of hydrogen in addition to a catalyst allows the cracking reaction to proceed at lower temperatures than in catalytic cracking, although pressures are much higher.
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Major Refining Processes Combination

Definition
Linking two or more hydrocarbon molecules together to form a large molecule (e.g. converting gases to liquids) or rearranging to improve the quality of the molecule

Process
Alkylation Important process to upgrade light olefins to highvalue gasoline components. Used to combine small molecules into large molecules to produce a higher octane product for blending with gasoline. Catalytic Reforming The process whereby naphthas are changed chemically to increase their octane numbers. Octane numbers are measures of whether a gasoline will knock in an engine. The higher the octane number, the more resistance to pre or selfignition. Polymerization Process that combines smaller molecules to produce high octane blending stock. Isomerization Process used to produce compounds with high octane for blending into the gasoline pool. Also used to produce isobutene, an important feedstock for alkylation.
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Major Refining Processes Treating

Definition
Processing of petroleum products to remove some of the sulfur, nitrogen, heavy metals, and other impurities

Process
Catalytic Hydrotreating, Hydroprocessing, sulfur/metals removal Used to remove impurities (e.g. sulfur, nitrogen, oxygen and halides) from petroleum fractions. Hydrotreating further upgrades heavy feeds by converting olefins and diolefins to parafins, which reduces gum formation in fuels. Hydroprocessing also cracks heavier products to lighter, more saleable products. Deasphalting A process in which the asphaltic constituents of a heavy residual oil are separated by mixing with a liquid solvent. Everything will dissolve in the solvent but the asphaltics, which are subsequently removed.

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List of Refining Acronyms

AGO Atmospheric Gas Oil ATB Atmospheric Tower Bottoms BB ButaneButylene Fraction BBLS Barrels BPD Barrels Per Day BTX Benzene, Toluene, Xylene CARB California Air Resource Board CCR Continuous Catalytic Regenerator DAO DeAsphalted Oil DCS Distributed Control Systems DHT Diesel Hydrotreater DSU Desulfurization Unit EPA Environmental Protection Agency ESP Electrostatic Precipitator FCC Fluid Catalytic Cracker GDU Gasoline Desulfurization Unit GHT Gasoline Hydrotreater GOHT Gas Oil Hydrotreater GPM Gallon Per Minute HAGO Heavy Atmospheric Gas Oil HCU Hydrocracker Unit HDS Hydrodesulfurization HDT Hydrotreating HGO Heavy Gas Oil HOC Heavy Oil Cracker (FCC) H2 Hydrogen H2S Hydrogen Sulfide HF Hydroflouric (adic) HVGO Heavy Vacuum Gas Oil kV Kilovolt kVA Kilovolt Amp LCO Light Cycle Oil LGO Light Gas Oil LPG Liquefied Petroleum Gas LSD Low Sulfur Diesel LSR Light Straight Run (Gasoline) MON Motor Octane Number MTBE Methyl TertiaryButyl Ether MW Megawatt NGL Natural Gas Liquids NOX Nitrogen Oxides PP PropanePropylene PSI Pounds per Square Inch RBOB Reformulated Blendstock for Oxygen Blending RDS Resid Desulfurization RFG Reformulated Gasoline RON Research Octane Number RVP Reid Vapor Pressure SMR Steam Methane Reformer (Hydrogen Plant) SOX Sulfur Oxides SRU Sulfur Recovery Unit TAME Tertiary Amyl Methyl Ether TAN Total Acid Number ULSD Ultralow Sulfur Diesel VGO Vacuum Gas Oil VOC Volatile Organic Compound VPP Voluntary Protection Program VTB Vacuum Tower Bottoms WTI West Texas Intermediate WWTP Waste Water Treatment Plant 25

Safe Harbor Statement

Statements contained in this presentation that state the Company's or management's expectations or predictions of the future are forward looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words "believe," "expect," "should," "estimates," and other similar expressions identify forwardlooking statements. It is important to note that actual results could differ materially from those projected in such forwardlooking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valeros annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission, and available on Valeros website at www.valero.com.

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