Valero: Prospective Keystone Shipper

Valero Energy Corp. on Wednesday affirmed that it has agreed to participate as a prospective shipper, subject to regulatory approvals, on the 500,000 barrel per day expansion of the Keystone crude oil pipeline system from Western Canada to the U.S. Gulf Coast at Port Arthur, Texas. Earlier Wednesday, TransCanada and its partner, ConocoPhillips, announced plans to increase the commercial design of the Keystone pipeline to 1.1 million barrels per day by 2012.

In addition to its pipeline shipping commitment, Valero has an option to acquire an equity ownership position in the Keystone partnerships.

As part of its commitments to the pipeline, Valero has secured from several Canadian oil producers meaningful volumes of heavy sour crude oil, which will price competitively with equivalent grades of crude oil on the U.S. Gulf Coast. Once the Keystone pipeline expansion is complete, Valero expects to be one of the largest recipients of heavy sour crude oil from this expansion.

"This commitment represents a major accomplishment in our strategy to secure additional long-term supply of heavy sour crude oil for our complex Gulf Coast refining system," said Bill Klesse, Chairman and Chief Executive Officer of Valero Energy Corporation. "Because ample complex refining capacity already exists on the U.S. Gulf Coast, this expansion is a logical step in moving significantly more heavy sour crude oil into the Gulf Coast market, where it can be processed cost-effectively. The additional crude strategically aligns with our projects to increase ultra low sulfur diesel production at our Port Arthur refinery, which can process heavy feedstocks into clean products.

"For some time, Valero has been communicating its intent to secure Canadian crude oil delivered to the Gulf Coast, and we believe our participation in the Keystone pipeline expansion is the best opportunity to carry that forward," Klesse said. "Canada is the United States' leading trading partner and one of its closest allies, and it has very large undeveloped crude oil reserves, so bringing Canadian crude oil to the U.S. Gulf Coast makes sense on many different levels."

Valero Energy Corp. is a Fortune 500 company based in San Antonio, with approximately 21,000 employees and 2007 revenues of more than $95 billion. The company owns and operates 16 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.1 million barrels per day, making it the largest refiner in North America. Valero is also one of the nation's largest retail operators with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon.