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    Valero CEO: Improvement Ahead, Margins Remain Low

    Company sees refining margins recovering in the first quarter 2010.

    NEW YORK -- While U.S. refining margins remain depressed, Valero Energy Corp.'s Chairman and CEO Bill Klesse said he sees signs of improvement early next year, during the Platts Global Energy Awards here, according to a Reuters report.

    "Margins look better for Q1," Valero told reporters. "We need demand to recover."

    However, shuttering the company's 195,000-barrel-per-day Paulsboro, N.J., refinery remains "an option," according to Klesse and large-scale maintenance including a complete shutdown is still planned for the first quarter of 2011, according to the report.

    "We had interest in Paulsboro, but nothing came of it," he said.

    In addition, the U.S. East Coast remains a "difficult, very competitive" market, while elsewhere in the country, notably California, margins are better, Klesse said.

    Valero recently closed its 210,000-barrel-per-day Delaware City, Del., refinery for economic reasons, according to the report. Klesse said at the conference those employees received severance and by around Jan. 20, would be off Valero's payroll, according to the report.

    Meanwhile, Valero's capital spending in 2010 is estimated to be $2.0 billion to $2.5 billion, down from 2009's $2.5 billion to $2.9 billion, Reuters reported.

    He emphasized the company expects a loss in the fourth quarter 2009, at least as large as the $219 million loss seen in the third quarter, excluding special items, the report stated.

    Despite this, Klesse said the company was "actively looking" to make acquisitions in the ethanol sector, Reuters reported.

    Klesse said: "We really are refiners of petroleum but we believe that ethanol is part of the fuel mix. You should not be surprised to see us continue to look for opportunities," but declined to offer any specifics on upcoming deals.

    Valero Executive Vice President of Corporate Development and Strategic Planning Gene Edwards told Reuters: "Ethanol is doing great," and the company is making a net margin in ethanol of more than 50 cents per gallon so far in the fourth quarter.

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