Valero reports strong Q4 for renewable diesel, ethanol

Valero Energy Corp. released fourth quarter financial results on Jan. 27, reporting the Diamond Green Diesel expansion project was completed ahead of schedule. The company also reported strong results for its ethanol segment.

Valero’s renewable diesel segment, which consists of the DGD joint venture, reported $150 million of operating income for the fourth quarter of 2021, up from $127 million during the same period of the previous year.

Renewable diesel sales volumes averaged 1.6 million gallons per day in the fourth quarter of 2021, up 974,000 gallons per day when compared to the fourth quarter of 2020. Valero primarily attributed the higher operating income and sales volumes to the startup of the DGD expansion project at the company’s St. Charles refinery in Norco, Louisiana, during the fourth quarter.

According to Valero, that expansion project at—referred to as DGD 2—commenced operations during the final quarter of 2021 on-budget and ahead of schedule. The expansion project was designed to boost production capacity at the site by 400 MMgy, bringing total capacity at the St. Charles facility to 690 MMgy of renewable diesel and 30 MMgy of renewable naphtha. Due to process and improvement and optimization, the expansion project actually boosted production capacity by 410 MMgy with the St. Charles facility now able to produce 700 MMgy of renewable diesel.

DGD is also working to develop a renewable diesel plant at Valero’s Port Arthur refinery in Texas, referred to as DGD 3. Development of that facility, which is expected to have a renewable diesel production capacity of 470 MMgy, is also progressing ahead of schedule and is now expected to commence operations in the first quarter of 2023. Once operational, that facility will boost DGD’s total production capacity to 1.2 billion gallons per year of renewable diesel and 50 MMgy of renewable naphtha.

Valero’s ethanol segment reported $474 million of operating income for the fourth quarter of last year, up from $15 million during the same period of 2020. Ethanol production volumes averaged 4.4 million gallons per day for the fourth quarter, 278,000 gallons per day higher than in the same period of the previous year. The company primarily attributed the growth in operating income to higher ethanol product prices.

Valero reported that the large-scale carbon sequestration project under development by Black Rock and Navigator is progressing on scheduled and still expected to begin startup activities in late 2024. Valero is expected to be the anchor shipper of carbon dioxide, with eight of its ethanol plants connected to the system. The carbon capture and sequestration (CCS) project is expected to lower the carbon intensity (CI) score of ethanol produced at those eight plants, resulting in higher product margin.

Moving into 2022, Homer Bhullar, vice president of investor relations and finance at Valero, said the company expects full-year sales volumes for renewable diesel to be approximately 700 million gallons with operating expenses of approximately 45 cents per gallon. The ethanol segment is expected to produce 4.2 million gallons per day with operating expenses at 44 cents per gallon.