Valero Refineries to Run Up to 73% of Combined Capacity in Second Quarter

Valero Energy Corp plans to operate its 15 refineries up to 73% of the combined total throughput capacity of 3.1 million barrels per day (bpd) in the second quarter of 2020, said Homer Bhullar, vice president of investor relations, on Wednesday.

Valero has reduced production at several refineries as demand fell because of stay-at-home orders to stem the spread of the coronavirus.

The company, which is the second-largest refiner in the United States by capacity, has begun to see an increase in demand in the U.S. Gulf Coast and Midwest as states in those regions begin to lift stay-at-home orders.

“It kind of got to the point where we were seeing demand about 55% of what we would call normal,” said Gary Simmons, executive vice president and chief commercial officer. “So already, it’s about a 9% increase of where we were in early April.”

Overall, Valero expects gasoline demand to increase gradually, Simmons said.

“We see a fairly gradual recovery in demand, but gasoline demand getting back close to where it was the pre-COVID,” he said. “On the jet side, I think we believe that the lower jet demand is probably here with us longer.”

Ethan Bellamy of R.W. Baird sounded a cautious note about optimism for the recovery.

“There’s a rebellious attitude among the less infected areas as people demand to go back to work,” Bellamy said. “That may backfire dramatically, or it could spark the recovery. I don’t think anyone really knows how that will play out.”

COVID-19 is the disease caused by the coronavirus and has infected more than 1 million people in the United States and caused more than 58,000 deaths.

Among the steps Valero took to cut production as demand dropped off was to idle the 92,000-bpd gasoline-producing fluidic catalytic cracker (FCC) at its St. Charles refinery in Norco, Louisiana, said Lane Riggs, president and chief operating officer. The FCC had just finished an overhaul.

The company also pushed some discretionary maintenance projects at its refineries into 2021, Riggs said.

(Reporting by Erwin Seba; Editing by Chizu Nomiyama and Marguerita Choy)