© 2019 Valero. All rights reserved.

What’s Moving on the Waterways?Commodities Panel: PetroleumCraig Darilek, Sr. Manager Chartering

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Agenda

1 Valero Introduction

2 Petroleum Market Summary & Outlook

3 Petroleum Movements on Waterways

4 Challenges and Outlook

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Premier manufacturer, distributor, and marketer of transportation fuels and petrochemical feedstocks

15 petroleum refineries

3.1 million barrels per daythroughput* capacity

Manufacturer and marketer of

transportation fuels, petrochemical feedstocks, and other

specialty products ~6,000 employees

Safety is our foundation for success

Environmentally responsible operations

World’s 2nd

largest corn ethanol

producer

14 ethanol plants in the U.S. with a combined

production capacity of 1.7 billion gallons per year

~1,000 employees

Continued investment and growth in ethanol

business

World’s 2nd

largest renewable diesel producer

275 million gallons per year

Produces low-carbon

intensity renewable diesel from

recycled animal fats, used

cooking oil, and inedible corn oil

Planned expansion to 675 million gallons per year by late

2021

Low-carbon fuel well-positioned for export growth

Low-carbon fuel sold in California, Canada, and Europe

*in joint venture with Darling Ingredients Inc.

Largest global independent

refiner

Lowest-cost operator in the

industry 22% share of U.S. ethanol exports in

2018

100% compatible with existing engines

and infrastructure

*Processing of crude oil and other feedstocks

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4

CANADA

UNITEDSTATES

BENICIA

WILMINGTON

MCKEE

ARDMORE

THREE RIVERSBILL GREEHEY

(CORPUS CHRISTI EAST AND WEST)

TEXAS CITYHOUSTON

PORT ARTHUR

MERAUX

ST. CHARLES

MEMPHIS

MOUNT VERNON

LINDEN

BLOOMINGBURG

SAN ANTONIO

ALBIONAURORA

HARTLEY

WELCOME

ALBERT CITYFORT DODGE

CHARLES CITY

JEFFERSON

JEAN GAULIN(QUEBEC CITY)

14 VALERO ETHANOL PLANTS

15 VALERO REFINERIES

VALERO TERMINALS

VALERO OFFICES

RENEWABLE DIESEL PLANT

MONTREAL

SUNRAY WIND FARM

PERU LIMA

LONDONPEMBROKE

UNITEDKINGDOMIRELAND

RIGABLUFFTON

LAKOTA

VALERO HEADQUARTERS

4 COGENERATION PLANTS(EXISTING/UNDER CONSTRUCTION)

MEXICOMEXICO CITY

Our Operations

WHOLESALE MARKETING PRESENCE

4

5

6%

22%

53%

4%15%

PADD 1 PADD 2 PADD 3PADD 4 PADD 5

U.S. Distillation Capacity End-2018

Total 18.8 Million Barrels per Day

U.S. Refining Capacity – 18.8 MBPD in 2018Capacity focused in USGC and Mid-Con

Source: DOE

6

84

86

88

90

92

94

96

2011 2012 2013 2014 2015 2016 2017 2018 2019

U.S.

PADD 3 (USGC)

U.S. Refinery UtilizationU.S. refineries have been running harder, led by the USGC

U.S. Refinery Utilization(12 month moving average)

Refinery utilization moved higher starting in the middle of last year, USGC refineries supplying domestic demand and product exports to Latin America and Europe.

%

17.2 MBPD

9.3 MBPD

Source: EIA/DOE, Petroleum Supply Monthly (2019 through July)

7

U.S. Gasoline + Diesel + Jet Demand(12 month moving average)

13.8

14.2

14.6

15.0

15.4

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

U.S. Transportation Fuels DemandRefineries running hard to supply fuels demand that has been rising

Source: EIA/DOE, for both historic data and forecast

U.S. transportation fuels demand has been structurally rising since earlier this decade.

Million barrels per day FORECAST

8

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8

Other

Europe

Latin America (incl. Mexico)

U.S. Product ExportsLatin America is the primary destination for U.S. product exports

Gasoline, Diesel and Jet Gross Exports

Exports to Latin America have averaged over 1.9 million bpd over the first 7 months of this year, about 4x the level of a decade ago.

Million barrels per day

Source: EIA/DOE, Petroleum Supply Monthly (2019 through July) Data includes motor gasoline blending components

9

4

6

8

10

12

14

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Million Barrels per Day

Monthly U.S. Crude Production

U.S. Crude ProductionProduction has more than doubled in the last decade

FORECAST

Source: EIA/DOE, for both history and forecast

10

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2014 2015 2016 2017 2018 2019

Haynesville

Niobrara

Appalachia

Anadarko

Bakken

Eagle Ford

Permian

U.S. Crude ProductionProduction supported by large inventory of DUCs

Drilled But Uncompleted Wells (DUCs)

Permian

Source: EIA/DOE

DUC inventory buildup focused in the Permian, where they have doubled in the last two years (August 2017 vs. August 2019).

Eagle Ford

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U.S. Crude ExportsCrude exports up 850,000 bpd year-to-date

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2015 2016 2017 2018 2019To Canada To Europe To AsiaTo Other Regions Weekly Data Annual

Million Barrels per Day

2.00

2.85

Source: DOE/EIA exports by destination through Jul-19, Census Bureau for Aug-19, DOE/EIA weekly numbers for Sep-19

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Valero’s Use of Inland Waterways

SAN ANTONIO

MONTREAL

• 8 of 15 refineries on inland waterways, representing 1.7 million barrels per day capacity

• 9,800 Barge Transfers per year– Roughly 1 transfer per hour

• 2,800 Miles utilized• 65 Inland Marine Locations• 105 Segregated Products &

Feedstocks• 15.5 Million tons transported per year

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Percent Valero Movements by Product

Feedstocks41%

Blendstocks25%

Finished Products

25%

Crude2%

Aromatics / Gases

5%

Ethanol2%

• Finished product delivery a small part of barging activity

• Important to refinery optimization and system balancing

• Key resource during maintenance and turn-around activities

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Total Inland Trade

Petroleum Products 2017 Thousand BPD

Crude Petroleum 639 20%Gasoline 494 15%Kerosene / Distillate Fuel Oil 641 20%

Residual Fuel Oil & Asphalt/Tar/Pitch 532 16%

Lube Oil & Greases/Petrol Jelly 7 Wax/ Naphtha & Solvents 240 7%

Petro. Coke/Hydrocarbon & Petro Gases, Liquefied & Gaseous/Petroleum Products 286 9%Alcohols 180 6%

Benzene & Toluene / Other Hydrocarbons 213 7%Total Petroleum Products 3,225 100%

Reflects all waterborne commerce on inland waterways

Source: Army Corps of Engineers – Waterborne Commerce

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Petroleum Movements between PADDs a good measure of long-haul freight

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Inter-PADD movements - EC, GC & MW

Thousand Barrels per Day

Source: EIA/DOE

0

50

100

150

200

250

300

350

400

450

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Crude

Products

Excludes movements between EC & GC assumed to be coastwise

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Inter-PADD movements - EC, GC & MWThousand Barrels per Day

0

50

100

150

200

250

Crude Oil Products

Mainly Down River –PADD 2 to 3

Source: EIA/DOE

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Down River crude trade has revived

0

20

40

60

80

100

120

140

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Down RiverEast BoundWest Bound

Thousand Barrels per Day

Source: EIA/DOE

19

Slight decline in 2019 likely due to weather

-

20

40

60

80

100

120

140

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Products

Down River Up River East Bound

Thousand Barrels per Day

Source: EIA/DOE

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Down River Products – PADD 2 to 3

Residuals & Other30%

Ethanol & Renewables

28%

Feedstocks28%

Blendstocks10%

Gasolines4%

2018/2019 - 89 MBPD

Residuals & Other33%

Ethanol & Renewables

17%

Feedstocks37%

Blendstocks9%

Gasolines4%

2014 – 99 MBPD

0

5

10

15

20

25

30

35

40

14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18

Residuals & Other Ethanol & Renewables Feedstocks Blendstocks Gasolines

Thou

sand

BPD

Source: EIA/DOE

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Ethanol Exports have driven inland activity

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Up River Products – PADD 3 to 2

Distillates33%

Blendstocks20%

Feedstocks20%

Residuals & Other17%

Gasolines10%

2018/2019 – 56 MBPD

Distillates35%

Blendstocks31%

Feedstocks9%

Residuals & Other16%

Gasolines9%

2014 – 64 MBPD

-

5

10

15

20

25

30

35

14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18

Distillates Blendstocks Feedstocks Residuals Gasolines

Thou

sand

BPD

Source: EIA/DOE

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Challenges

• Waterway Infrastructure Maintenance– Though necessary, still disruptive

• Alleviated with planning good communication

• Lock Hot Spots – Brazos Flood Gates on Texas Coast• Continuous Operational Improvement

– Safety & Environmental

• Increased Labor Costs impact service sectors

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Overview of Petroleum Waterway Use

• Increased Crude Production Capacity

• Abundant Natural Gas– Methanol & Chemicals

• Petroleum Demand Growth– Trade policy resolution– Easing monetary policy

• IMO 2020– Refinery Rebalancing– New Fuel Segregation– Diesel Cracks

• Logistics Optimization– Location Exchanges– Pipeline Utilization

• Pipeline Infrastructure

Bullish Factors Bearish Factors

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Questions and Answers