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Valero evaluating carbon emissions sequestration options after pipeline partner scraps project

Valero Energy Corp. leaders on Thursday told investors that the San Antonio-based oil refiner is still evaluating other projects to sequester carbon emissions after its pipeline partner scrapped multibillion-dollar plans last week.

Navigator Energy Services was working on a 1,300-mile pipeline across the Midwest to collect and store carbon emissions underground from the corn ethanol industry. Valero announced its support of the project in 2021, saying the pipeline had the potential to expand beyond the initial plan and capture up to 8 million metric tons of carbon dioxide per year.

“We still see carbon capture and storage as a strategic opportunity to reduce the carbon intensity of conventional ethanol, which would also qualify it as a feedstock for sustainable aviation fuel,” Valero’s vice president of investors relations, Homer Bhullar, said during the company’s third-quarter earnings call on Thursday. “Without carbon capture and storage, conventional ethanol does not have a pathway into (sustainable aviation fuel) under today’s policies.”

Navigator abandoned the $3 billion project, citing “unpredictable” regulations and government processes. The company faced opposition from landowners and some environmental groups who view the pipelines as a dangerous means to prop up fossil fuel companies.

At least two other large pipeline projects in the Midwest could wind up joining Valero as a partner to replace Navigator, but the oil refiner didn’t offer specifics Thursday.

Valero has another ongoing $315 million project related to sustainable airplane fuel at Port Arthur, which is expected to be completed in 2025.

Once completed, the plant will have the option to upgrade up to half of its annual 470 million gallons of renewable diesel to sustainable aviation fuel, which would have similar properties to jet fuel but a smaller carbon footprint.

“While there are broader factors that may drive market volatility, we remain focused on things we can control,” CEO Lane Riggs said of the project.

Renewable diesel — a fuel made from fats and oils — is processed to be chemically the same as petroleum diesel. The segment reported $123 million of operating income for the third quarter, according to Valero, down about $100 million from the same period the year before because of lower margins.

Sales volume, however, was up 761,000 gallons per day at about 3 million gallons per day.


Valero’s ethanol segment reported $197 million of operating income compared to $1 million in third quarter 2022. Ethanol production volumes average 4.3 billion gallons per day. Operating income was higher because of higher production volumes and lower corn prices during the most recent quarter.

The company’s oil refining segment reported operating income of $3.4 billion for the third quarter, down slightly from the same period last year. Valero’s throughput volume averaged 3 million barrels per day in the third quarter

“Our refineries operated well and achieved 95 percent throughput capacity utilization, which is a testament to our team’s relentless focus on operational excellence,” Riggs said. “Product demand remained strong in our U.S. wholesale system, which matched the second quarter record of over 1 million barrels per day of sales volume.”

For the third quarter, Valero reported net income to stockholders of $2.6 billion, or $7.49 per share, and returned $2.2 billion to stockholders through dividends and buybacks.

So far this year, the company has reported $109.4 billion in revenue compared to $134.6 billion over the first nine months of 2022.

At market close Thursday, Valero’s stock was trading at $125.36 per share, down about 1.2% from the previous day’s closing price.


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