$1.2 billion Valero project will be complete this year

Construction on a $1.25 billion hydrocracker at Valero’s St. Charles refinery in Norco will be completed by the end of the year, according to an earnings statement released by the company.

The new hydrocracker, which the company says will reach full operation in the second quarter of 2013, is expected to create around 30 permanent jobs. It will produce 49,000 barrels of diesel fuel and 11,000 barrels of gasoline per day when completed.

A hydrocracker uses heat and hydrogen to break down heavier elements of crude into diesel and kerosene.

Valero, which recently completed major turnaround maintenance at the Norco facility, also plans to go online with a new hydrocracker at its Port Arthur, Texas plant by the end of the year.

"Our team has a rigorous plan to ensure an orderly and safe startup of these very large, complex and high-pressure hydrocrackers," Valero Chairman and CEO Bill Klesse said.

Valero’s retail segment reported record high quarterly operating income of $172 million in the second quarter of 2012 versus $135 million of operating income in the second quarter of 2011. The company says the increase in operating income was mainly due to higher fuel margins and volumes in U.S. retail.

This year, the company expects to spend $3.6 billion due to the acceleration of certain projects originally scheduled for completion in 2013.

"After the hydrocrackers start up, the estimated contributions from these growth projects, combined with the expected decline in capital spending, should increase free cash flow," Kleese said.