The old cliché of good news and bad news is certainly true with Valero Energy Corporation’s announcement concerning their Port Arthur refinery.

Valero decided to postpone the 45,000 barrel-per-day coker expansion project until further notice at the refinery because of expenses and economic uncertainty. They will proceed, however, with their 50,000 barrels-per-day hydrocracker unit expansion project.

Bill Day, Valero’s director of media relations said the projects were discussed at the corporation’s third quarter earnings conference call and it was decided to remove the coker project from the 2009 budget.

“We’re not scheduling it (coker unit); it hasn’t been scrapped. The hydrocracker is still going on,” Day said. “Our method was to reduce capital expenditures, or spending costs during economic uncertainty.

“Overall the company is doing very well. We’ve been very profitable, even compared to other companies. At this time, we want a lot of cash on hand and not a lot of expenses.”

However, on Tuesday, the company, the largest U.S. independent oil refiner, also said its third-quarter profit fell 9 percent from a year ago, but its results were better than Wall Street forecasts.

The San Antonio-based company also said it was reducing capital spending by another $800 million, citing the uncertain economic environment and volatility in the refining sector. The company has now reduced capital spending by $1.5 billion from the $4.5 billion that was originally budgeted.

Its shares jumped 8 percent, or $1.25, to $16.36 in early trading. They've traded in the wide range of $14.59 to $73.68 in the past year.

Valero held a groundbreaking ceremony this summer to kick off its $2.4 billion coker and hydrocracker units that would employ 2,000 construction worker at it’s peak. Now that the coker is on hiatus, the price of the hydrocracker will be $1.6 billion instead. Day said he wasn’t sure how many construction workers will be employed at the present time.

He added there is a low demand for refined products such as the coker unit would produce. Once the margin for these refined products would rise, the company may resume talks again about proceeding with the coker.

Port Arthur Mayor Deloris “Bobbie” Prince said she regretted the current loss of the coker unit and possibly additional jobs, but she is thankful for the $1.6 billion hydrocracker still proceeding.

“It’s certainly bad news. We were looking forward to the expansion. It will be a loss to the economy — any expansion of this magnitude would affect us in a negative way,” Prince said.

Valero reported in a press release its July-September results and announced it was scaling back spending by 33 percent this year and cutting its 2009 budget. The corporation reported third quarter 2008 income from continuing operations of $1.2 billion, or $2.18 per share, which compares to $848 million, or $1.34 per share, in the third quarter of 2007.

Valero shares rose $1.70, or 11.3 percent, to $16.81.

Port Arthur refinery Manager Greg Gentry said in a prior News article the project with both the hydrocracker and coker units would increase production from 325,000 barrels-per-day to 405,000 barrels-per-day and help utilize crude capacity. The hydrocracker unit would be completed in the fourth quarter of 2010 and the coker unit in the first quarter of 2011.