All right. As a brief overview of Valero, we are a refining and wholesale marketing company very focused on that business now. We have ethanol production as well, lots of logistics, but we did spin off our company retail to you. We have about 16 refineries, 2.8 MMbpd of capacity. We are large, obviously. As I said, we are a wholesale marketer.
We have a branded wholesale marketing segment in the business and about 7,300 branded outlets. They are actually Valero, Diamond Shamrock, Texaco, Beacon, Ultramar. We have all these different brands. We are in the corn ethanol business. We are the third largest producer there. We also have a plant that will start up here in the third quarter.
It begun here at the end of the second quarter, where we are going to make renewable diesel, and we have a partner in Darling, and this is actually taking fats, greases, waste animals from chicken processing, things like that, and make a very high-quality diesel fuel. With the CST spin, we actually dropped our employment base a little more than in half. This is the footprint of our company. You can see it is a very diverse footprint.
We are in most of the basins. We exited the U.S. East Coast, but we acquired Pembroke in the U.K., and we have our Quebec refinery. We believe we have very strong access to the East Coast without actually having an operation there. You can see the spread. Also, where our ethanol plants are located are well-positioned as well.
The point I would like you to notice, because this is what is happening, is as the oil, NGL, natural gas liquids, everything is coming to U.S. Gulf Coast. More than 50% of our refining capacity is in the U.S. Gulf Coast. Generally, this is what we are doing really, enhancing our returns. It is all strategy-driven here to add long-term shareholder value. If you think about it, we are adding MLP-able assets, railcars, pipelines, terminals, docks.
Then we come to expanding distillates. I have got a slide later on, shows it is growing faster in the world, better margins, processing more light oil, export more products. Valero does not present to you a U.S. demand picture for transportation fuels. We do not have a lot of growth. We do not see that happening. We do think volumes would improve with economic recovery, but then you have CAFE and other factors influencing it.
For us, we are very focused that the volumes are going to be exported. NGLs, we are looking at alkylation projects. We are already in the BTEX business. You have these kind of opportunities that are really coming back to the United States. We spun off our retail, and we have mentioned we are evaluating forming another MLP since we already had one that basically left before.
We continue to return cash to the shareholder through dividends and share buybacks. There are a few key trends. I think you all know these very well. U.S. and Canadian oil production is going up very rapidly. It is up over 1 MMbpd , I guess, year on year again. Significant infrastructure investments are going in by everybody, but including us as well, as I mentioned.
Low-cost natural gas is a huge competitive advantage, frankly, for all manufacturing, but certainly for refining petrochemical industries. It's just a huge advantage that accrues to the U.S. and North America. Distillates are growing more rapidly. It is the fuel of choice when you look at transportation fuels in the world, so it's growing faster than gasoline, and it is a bigger market. You just think about our competitive position.
With exports growing, you have undersupplied markets. You were actually taking market share from Western Europe because we're far more competitive as a business. Plus, you've had some shutdowns. You have poor operations in certain countries that have just allowed us to have our industry in the U.S., but then Valero to have an advantage in the Atlantic Basin. Going into a little more detail here, it's clear that production is going up rapidly.
This is U.S. and Canadian production here. Plus, the purple line is imports into the U.S. You can see how they're dropping. Then look at this growth going out to 2020. You all have seen many different forecasts. You have your own forecast, but they're all the same way. They're all going up to the right. You cannot export U.S. crude today.
You can export it to Canada. There are some ANS exceptions, but really, this crude is accruing, and as I mentioned earlier, accruing down primarily on the most cost-effective way down through the Midcontinent down to the U.S. Gulf Coast. In the yellow here, that includes the Gulf of Mexico because several people have mentioned to me the Gulf of Mexico is growing as well, and you can see that looking at the yellow part of this chart.
Then, as you know, because where all this oil is being found, when you look at the basin maps, when you visit with E&P companies, it's in places you don't have the logistics. This chart clearly shows the impact on some of the then discounts because you go to a higher form of transportation. That higher form is rail. So where you lack pipelines, it's been rail. There has been some trucking, which is even more expensive than rail. Looking at this, you can see as we go down with the certain types of crude, and we know they're from these basins, then the little triangle is the trailing four-week.
All these differentials have come in from the last year, and that indicates to you that transportation is being added and there's more takeaway capacity coming into all of these markets, including the WCS market as well.
Now, I just mentioned we're all investing in these logistics, and so you can see on this chart we have this is increasing inland to the Gulf Coast logistics. We've made an estimate of how much is actually out there in the capacity. This is to the Gulf Coast. You can see here as you look at this is going up very rapidly. Now, the yellow line we have on this chart is this into the Gulf Coast, the light and medium sweet imports, and you can see how quickly that is dropping.
We're down now to just a little over 100,000 bpd of imports. That tends to be unless there's a distressed cargo in the eastern Gulf of Mexico where we're lacking logistics to go from west to east, but those are eventually being solved as well. You can just see how rapidly, and this is Valero's sweet spot as this oil is coming towards us.
Given that the opportunity to get these cost advantage crudes, our strategy as we look at it is we're linked to pipelines. We're doing things to improve those logistics. We're benefiting from all these increases, whether it's Longhorn, BridgeTex, Seaway, looping of Seaway, Keystone XL South, whether it's Energy Transfer trunk line, as some of you have been informed about, all of these pipelines and their capacity are coming our way. St. Charles, we're building a rail facility there.
That's in New Orleans. So it's just outside of New Orleans to handle Canadian crudes. We also are looking at other pipeline options there. Plus, we barge down to Mississippi as well. Benicia, we're working a rail facility. We expect to have this in operation by the fourth quarter. We're also working on things in Southern California, but they're just taking longer.
In Quebec, so this would be up on the St. Lawrence River. We're actually putting in rail that should be operational in July, 30,000 or so barrels a day. That will expand. We're also involved in the Enbridge Line 9. We also have shipped a cargo of Eagle Ford to Canada. We have a license to do that.
This is why I said to those of you that listened to our earnings call that I believe our Quebec refinery in a year or two, somewhere in that range, will be a North American supplied refinery, where today it is a foreign supplied refinery, if you consider foreign supplied to North America. You have your own maps.
You try to put your numbers on a piece of paper, as we have done here. We've tried to show what we think is happening when you look about 12, 24 months because things move around a lot month to month. We've estimated these different numbers. Some of it we actually know what it costs because we've been trying to do it, or these are our estimates. Clearly, rail is clearing east and west. There is some rail north and south.
Some of you know there's another rail facility going in over in Beaumont. So there's a lot of rail happening around. But you can see numbers we put down here. You have the West Texas stuff that's flowing to the Gulf Coast. But this is how we see these markets largely developing.
If you look at even the East Coast, we can ship from Corpus Christi to Quebec Refinery for around $2 a barrel. Yet if you go into the East Coast of the U.S., it's going to be in the $5 or $6. One of our competitors actually disclosed a number of $4.50 a barrel, and they were the first mover. That's because of Jones Act versus non-Jones Act. So you can get a good feel for the numbers.
If you start thinking about the differentials as you walk through this slide, you have Cushing to the Gulf Coast, Houston, then that's a differential, $4 or somewhere in that range. Houston to St. James, you're going to have a differential. You all know what this Shell Ho-Ho tariff is.
You can see as things keep moving along, yet if you're barging and you have enough barge capacity, then certainly from Houston to St. James would be less than the Ho-Ho tariff if you could do it by barge. Switching from oil just to natural gas, this is a huge competitive advantage for North America. It's huge for any manufacturing, whether it's the petrochemical industries, steel making, it doesn't really matter. It's a huge advantage. It's a huge advantage for the refining business. Here we articulated for refining, and we go over to $4 natural gas.
We made it equivalent to a barrel here, so $1.11 a barrel. If you think about where a refiner uses natural gas, cost of goods sold, hydrogen, gets usually handled in cost of goods sold or in expense. To put this whole chart in perspective for you, Valero's cash operating cost through our entire system, $3.70 a barrel. Our whole industry is very competitive, so I'll say we're better than the other guys, so say $4 for the industry.
Its cash operating cost, very efficient business. You start looking at these differentials between somebody running LNG versus North America. You can see that's $3 a barrel. It's nearly almost all of our cash operating costs through our system. This is a huge competitive advantage. Valero is a huge consumer of 700 million cubic feet a day. Every dollar is $700,000 a day.
Roughly it's a 50/50 mix between cost of goods sold and expense, but it's still cash. Part of our focus has been on distillates. I mentioned it earlier, just looking at it. The chart you have at the bottom is the Gulf Coast product margins. Blue is gasoline, red is distillates against Brent. The chart on your right is the demand in the world, the global demand, the red line being diesel and the blue being gasoline. Both are growing in the world, but you can see that distillate's growing much faster.
Then you come back over to the left, and you see the margins are obviously much better in distillate. This is a key part of our business. Europe is systemically short diesel. They're long marginal refining capacity, but they process more expensive crude oils, and they don't have the natural gas advantage.
They become in the Atlantic Basin, the marginal refiner. At Valero, I mentioned we're increasing our distillate yield. Those of you who have invested or follow us know we've been building these hydrocrackers. We finished one last year. We're finishing the other one right now, it will be operating in the third quarter in July.
We've increased our distillate yields a lot. You can see the chart on your left is just the yields and shows where Valero matches with some of our peers, and then how we're changing over time. The chart on the right is just a graphic representation of it. Basically, we have the two big plants, the second one finishing right now. Then we have some expansions. We're going to expand each of those. We already have our permit in New Orleans, St. Charles, to expand. We also will expand in Port Arthur.
We'll convert the Meraux Refinery, which we bought to make distillates because we were going to convert the units that they have there. We get very close to a one-to-one ratio, which is very unique for a North American refiner. If you look at the U.S. refining capacity, it's competitive. We've already mentioned crude oil, natural gas, very efficient business.
Here we have a couple of charts. The one on your left shows this huge change in net product imports. You can see how U.S. used to be a product importer, and we swung over to a large exporter. Put it in perspective. U.S. demand about 3.6 MMbpd of diesel. We're exporting 900 to 1 MMbpd of diesel. 20% to 25% of the U.S. distillate production is being exported. Gasoline, we import into the Northeast.
We're exporting out of the Gulf Coast. We're still a net importer of gasoline, but only slightly. We're very competitive here. If you start to look at where are you competitive, you can see the Mid-Continent, the Gulf Coast, obviously the Rockies, they're all very competitive markets just looking at operating rates. Then you have the disadvantaged markets, which you would expect to see this way. Our strategy has over time, we have this Atlantic Basin.
We want to be a real player in the Atlantic Basin. We added Pembroke. We have Quebec. We come out of the Gulf Coast. Where's your markets? Your markets are South America, Latin America. Demand growth, just outright growth, and also supply has been reduced by some of the Venezuela shutdown of PDVSA. There was some East Coast refining, and obviously the refining shutdown in Europe.
Of course, these markets import West Africa. Don't be surprised when you hear about a gasoline cargo actually going to West Africa from the U.S. Gulf Coast. Now it's all about demand. Crude oil continues to grow. Demand or consumption is growing in the world. It's not really growing in the United States, as I said earlier, but it's growing in the world. Emerging markets are leading this, so you start to think about it is a global business we're dealing in.
Transportation always is the equalizer into all of these markets. Liquid products, they're storable, they're transportable, they're fungible, so you wind up moving them everywhere. When you look at this, you can see we have a little bit of growth in the U.S. in the chart. That's because we think we are going to get an economic recovery here.
I know demand has been weak for the first few months of the year, but we still believe. Remember, housing is a big factor in this. When you still have 8% unemployment, California have over 10% unemployment, we sell fuel to everybody. If these people would get back to work, our demand will go up.
Then over time, CAFE and other factors will influence it. Demand in the world's growing. All of you have this concern, there's a lot of refining capacity being added. No doubt about it. China and the Middle East are adding significant amounts of capacity. One plant in Saudi starts up this year. There's another plant starting up. You can see, but those are going for internal demand and exports into those region.
China tends to build capacity that ultimately services its own demand, even though refining capacity is added in steps where demand is more on some trend line. We see it still as strong export markets because a lot of it is still regional. A lot of these new capacity that's being added is costing a huge amount of money. The Brazilian refinery now is $16 billion-$20 billion for a 200 and something thousand barrel a day refinery. It's only four years late.
The Mexicans have the Tula refinery, which they're considering building, 230,000 bpd refinery for $12 billion. Somebody pointed out on the earnings call to Valero, one of the guys on the call, that some of these things are basically one and a half times Valero's entire capitalization. I don't think you're going to see them built.
You can buy products much more economically in the Gulf Coast. Politics gets into all of this. Now you even have the Colombians who announced the other day that their projects are way behind and way over budget. You're not going to get them built. Then you come to some of the other countries like Ecuador, Peru, Algeria, Egypt that announced refineries. Honestly, they don't have the money. Who's the weakest link?
The weakest link is Western Europe. There, you're probably 2 MMbpd or 3 MMbpd of refining capacity that's on the bubble. Now switching back to Valero's capital spending. You can see on this chart we tried to give you a better disclosure. We're completing the St. Charles hydrocracker, as I said. We have those expansions, but you look at the things we're doing way over on your right.
Logistics, distillate hydrocracking, processing lighter oils. They're very consistent with the trends that we've talked about and that actually you know about anyway. You can see how our money, we've raised our capital spending from the guidance I gave earlier in the year. It's mostly in the logistics area, although I have acknowledged that we've overrun and we've been late getting our St. Charles hydrocracker finished.
Very large project, and frankly, I think our people are doing a fine job, but we have overrun it and we are a little late. Looking at some of the logistics that we're doing. Many of you have heard me say the refining business has changed tremendously in the last few years. It's all about location. If you don't have the location, you better have the logistics to overcome some of your location disadvantages. That's what we've been doing here.
We're creating assets that can qualify for an MLP as well. These investments are in, as I said, rail unloading, rail loading, barging, and all of this. We purchased rail cars, but to show you how the business has changed, these rail cars are going to come in to us. They've been coming in, they're coming in monthly, and they're going to come in all the way through the second quarter of 2015. I mentioned that we have these facilities going in.
We're involved in Line 9 at Quebec, and we believe you have to be able to export products to the world markets. So expect us to continue to unlock value. We're reviewing an MLP. Valero already has done an MLP, came originally from Diamond Shamrock. Shamrock Logistics for some of the older people in here. Now it's NuStar. They've added some other stuff.
It separated completely in 2006. We're building a portfolio of logistics. We're not blind to the multiples that the marketplace is willing to pay for logistics assets. We do have assets that we've built, so we are actively looking at it.
These valuations and the numbers you know. We have a portfolio, at least of last year, somewhere between $50 million and $100 million of EBITDA, but that does not include all the stuff that I've been talking about that the company's investing in right now. Distillate hydrocracking. These hydrocrackers are the right project for the right time. They have a gas to liquids component. There's a very good chart in the back of our deck that explains where you get the liquid volume gain in that chart.
Our deck is well done by these two guys in that we give you a lot of industry data as well as stuff on Valero, but it actually explains the gas to liquids. Because when you have $4 gas and high liquids, there's just a lot of advantages there.
These are growth opportunities. In the first quarter, we disclosed that the Port Arthur hydrocracker, in and of itself, contributed $94 million of EBITDA. We had a little bit of downtime fixing a few things, so it would have been higher. There's no reason to assume that we're not going to be generating EBITDA in this range. Then we have the Diamond Green Diesel project that's finishing as well.
These expansions that we're going to do to these projects are really almost at a third of the capital cost of the grassroots facility, which you would expect some economies from the base. We'll add basically another hydrocracker here to our portfolio at about a third of the cost.
Just to take a little more on the hydrocracking, even in 2009, now this is just an EBITDA chart, but using the pricing in 2009, which was a very difficult year for us, but I know it was a difficult year for all of you, too. You can see these two units would have contributed $600 million. If you use pricing in 2012, it's over $1 billion. Really, we expect them to be $500 million EBITDA per year projects.
Just the two main hydrocrackers, which is very unique to Valero because we have these organic growth projects, one done and one that's going to be going here in the third quarter. Obviously, we want to run more domestic oil. It's coming. We showed the chart on production. It's coming very rapidly. Yes, we have a portfolio of heavy crude refining on the Gulf Coast, but we also have some light sweet crude plants as well.
We've announced two crude fractionators or toppers to allow us. They're unique because at those two refineries, Houston and Corpus Christi, we are buying feedstocks which price at world market, yet you have crude oil that's going to be a differential lower than world market. So you can see you have economics to do such projects. McKee will be done pretty darn soon.
We have opportunities at Port Arthur, where we have crude tower, and also at Meraux. The chart over on the right just shows you that we're still a feedstock buyer at Corpus Christi and Houston, but we'll be a lot closer and much more in balance. You just look at the overall volumes we have, and you can see that we've been increasing our ability here to run these cost-advantaged crudes.
The red line just shows the imports that we pull into the market as the U.S. in total, and they're declining. That's why when you look at all of these numbers, you see that North America, not just U.S., but you have to consider North America is becoming so much closer to being actually near balance on crude oil, which most of us would have thought never would have happened.
Still be a few million short, but it's an amazing event. We clearly are replacing these imports. We've been returning cash to the shareholder. We've demonstrated that we're doing that. We spun off 80% of retail. That's like $325 , $350 of value we gave you. We've raised our dividend. We've been buying our shares. In the last two years, four months, we've bought 37 million shares. We've been reducing our debt. We'll pay off another $300 million of debt.
You can see the chart on the lower right shows these numbers plus the retail spin. We continue to improve our operations. Many of the plants we bought were underinvested in, underutilized, underinvested. We've improved a lot. We have a clear goal to be a first quartile refiner in the benchmarking surveys. Our operations have improved. These are just two examples of the charts on your right.
Mechanical availability is key because everything starts there. If your plants are reliable, your safety statistics are better, your environmental performance is better, your regulatory performance is better. We really are very diligently working on all of our weak performers. You can never take your eye off of safety, environmental, or regulatory matters. We believe Valero is an excellent buy for the reasons I've said. We think this business is still going to be volatile.
We're going to have the spreads move around. In our appendix, we have some differentials for Maya, Mars, and all of them. They move around. It's always volatile. It's always seasonal. But you have these underlying trends that are here. They're coming our way, but they're good for the industry in the States, whether it's oil production, infrastructure, natural gas, replacing not as competitive underperforming refining.
For us, our distillate, our internal growth projects, our improving operations, our logistics, some petrochemical opportunities, alkylation opportunities, and we've been returning cash to the shareholder, and we continue to do it. We've never lost sight of our goal, which is to add long-term shareholder value. This is a long-term business, capital-intensive, long-term business. With that, thank you for your attention. Kurt?
When you talked previously about the issues you were having with crudes and making sure that you were getting what you paid for, could you talk about more specifically what that issue is? Is it crudes from certain basins? Is it crude being blended down at the Gulf Coast? Is it pipelines need to be more specific on what their specifications are so that you get the full range of chains in the crude?
Yeah. This has to do with crude quality and getting what you pay for. In our business, we have gravity adjustments, sulfur adjustments, BS&W. We don't buy water and solids. You have these adjustments, but you don't necessarily have a distillation formula. WTI, you would view WTI as WTI or LLS. You would think LLS is LLS, but that's not really what happens in our business.
LLS at St. James has been blended for years, and as a refiner, you're very careful. What's happening in the rest of the oil patch is natural gas liquids, or in this case, I'll deal just with condensates, whether it's the Eagle Ford, Cushing, whatever, you're getting so many condensates that the oil producers are having trouble getting rid of these condensates. You don't have logistics.
It comes to net backs. Where's the best place to dispose of condensates? We'll put it in the crude oil. Crude oil's gotten lighter. You're getting these other components, and for instance, at the Eagle Ford, we have a hard line in the sand. 55 API gravity or less is oil.
Anything above that is something else. What I think you're referring to, because I spoke last week, I guess, is that Midland WTI was above Cushing WTI, and yet it costs you transportation to get from Midland to Cushing. People were asking us, "Well, why would you do that?" That's because when you're buying a WTI barrel at Midland, you're getting a WTI barrel, and what you're getting at Cushing is not necessarily the same.
There was actually a couple dollar benefit in being able to buy a neat barrel versus a barrel that is blended. This is just the nature of the business and more we're adding people and adding expertise to be able to check and monitor more of the crude oil because if you get lighter crudes, it overloads our light ends units quicker. That is why I was speaking to that. It's really a problem with how do you get to the market these lighter crudes, thus condensates that you're getting.
Your CapEx budget in 2011 and 2012 was a bit elevated for the hydrocrackers, but it has come down in 2013. Looking out over 2014, 2015, should we expect CapEx to go back to those 2011, 2012 levels or stabilize where it is here, come down even further? Just trying to get a sense of that, coupled with your comments on increased spending on logistics.
We have raised our number to $2.850 billion this year. That does include about $60 million of retail. Yes, we are doing these projects, and the only guidance I have given is really for 2015, beyond 2014. I have said that in 2014, you can expect the capital spending to be in this $2.5 billion range. I have not given anything further out because, and the reason I have not is there are opportunities accruing to all of us in this industry.
Several people this morning asked me about NGL fractionators. I do not see Valero bringing much benefit to an NGL or synergies or knowledge to an NGL fractionator where Occidental or Marathon may be in the Utica or Enterprise or people have an expertise there. But then if you look at some of the other things that Valero does, we are already in the benzene, toluene, xylene business.
We are in the propylene business. For the last 15, 20 years of my career, we have been taking butane out of gasoline. Now all the butanes are coming at us. That is why on one of those slides, and I know I went quickly, we had a comment about alkylation. These are very good opportunities that I think you will have very inexpensive feedstocks. They are things that Valero does very well, and they will bolt right onto the refineries. So they are just opportunities that are being analyzed.
I do not see them as way over the top. I see them as good profit opportunities for our shareholders. Thus, I do not want to go any further out on capital spending. But they will be long-term contributors of shareholder value. It is just like the hydrocrackers. Because they were so long-term, most people did not appreciate them, but I think now everyone does accept they are the right project at the right time.
Since you've talked about the excess of condensates, what about a condensate splitter since you already have all the export infrastructure?
Well, now from NGL fractionating down to condensate splitter, the units that we're talking about doing are the two crude units down at the Gulf Coast because they fit our plants. Right now, I don't see us with a condensate splitter for basically the same reason we don't really bring that much to the table. We're not a gatherer of condensates where then you're going to get these streams, and I'm still going to have some of the components. So we're focused on what I put in this presentation more than actually a condensate splitter.
Okay. At this time, we're going to have to cut off the Q&A portion. Please join me in thanking [inaudible]
Thank you.