Valero AI Strategy, $315 M Darling SAF Project, $230 M FCC Investment, and 2 Key Risk Areas (2025)

Valero’s Shift to Operational AI, 2 Core Applications and a $79 M Renewables Loss

In 2025, Valero Energy’s AI adoption evolved into a focused, dual-pronged strategy that uses artificial intelligence as both a defensive tool to protect legacy refining margins and an offensive de-risking mechanism for its capital-intensive, financially underperforming renewables segment. This represents a significant shift from broader, less defined digital initiatives in the 2021-2024 period toward a pragmatic application of AI driven by clear financial and operational needs. The company is now applying proven AI techniques to solve its two most pressing business problems: maintaining profitability in its core business and achieving profitability in its growth business.

Pre-2025 Digital Foundations

Prior to 2025, Valero’s digital and AI efforts were foundational, concentrating on building the necessary IT infrastructure and data pipelines to support large-scale industrial operations. This period focused on establishing the capability for data-driven decision-making across its asset base. This groundwork was crucial, as an estimated 95% of AI projects falter due to inadequate data and infrastructure, a common challenge Valero appears to have addressed through partnerships with IT service providers like Kyndryl to ensure robust and trusted data systems.

2025’s Pragmatic Pivot

The strategy in 2025 became sharply defined, moving from foundational work to high-impact applications with clear financial targets. Valero is embedding AI directly into its core refining operations through two primary pillars: AI-enabled process optimization and predictive maintenance. This is exemplified by the $230 million investment in a Fluid Catalytic Cracking (FCC) unit optimization project, a clear signal that capital is being deployed where AI can generate tangible, near-term returns by improving throughput and efficiency in profitable legacy assets.

AI as a Renewables Lifeline

The most critical strategic shift is the deployment of AI to stabilize its renewables business, a move directly necessitated by the segment’s $79 million operating loss reported in the second quarter of 2025. This financial setback transformed AI from an optimization tool into a critical enabler for achieving profitability in its renewable fuels venture, Diamond Green Diesel. AI is now used for complex tasks like feedstock optimization, yield maximization, and carbon intensity scoring, directly addressing the variables that impact the financial viability of sustainable fuels.

AI to Redefine Partner Ecosystems and Boost Sales Performance
By 2025, AI is forecast to increase sales attributed to its utilization by 10% and improve sales prediction accuracy by 30%. This underscores AI’s transformative role in redefining partner strategies, incentives, and enablement for direct impact on revenue and forecasting.

Trust and Proactive Support Drive Critical Partnership Success
With 91% of buyers preferring trusted experts and 70% of customers valuing proactive, long-term support from vendors, building trust is paramount. As 80% of B2B sales shift to digital channels by 2025, strategic alignment on trust and mutual success is crucial for influencing purchasing decisions and fostering sustainable growth.

(Source: ACHIEVEUNITE — via Partnership and Collaboration Plan: Driving Business Growth in 2025 – Kifalme Africa)

$545 M in Capital Projects, Valero’s AI-Enabled Investments in Refining and SAF

In 2025, Valero directed major capital investments not into speculative AI research but into large-scale operational projects where AI acts as a critical enabler to guarantee efficiency, de-risk execution, and achieve target ROI. The company’s spending demonstrates a clear strategy of using AI as a multiplier on physical asset investments, ensuring that new and existing facilities perform at maximum financial and operational potential.

$230 M for Core Refining Efficiency

The $230 million investment to optimize its Fluid Catalytic Cracking (FCC) unit is a direct deployment of capital into its core business, underpinned by AI. This project uses advanced process controls, which are increasingly AI-driven, to enhance profitability from existing assets. By fine-tuning complex chemical processes in real-time, Valero aims to increase the yield of high-value products and reduce energy consumption, directly contributing to the $800 million in savings achieved by its Cash Improvement Plan in 2025.

$315 M to De-risk Sustainable Aviation Fuel

The centerpiece of Valero’s 2025 capital strategy is the $315 million final investment decision, with partner Darling Ingredients, for a new Sustainable Aviation Fuel (SAF) project. The economic success of such a complex, large-scale biofuel facility depends heavily on advanced technology. AI is essential for managing variable feedstocks like used cooking oil, optimizing chemical processes to maximize SAF yield, and continuously monitoring operations to meet strict emissions and quality standards, thereby de-risking this significant investment in the energy transition.

Table: Key Valero AI-Enabled Capital Investments (2025)

Valero Partnership Strategy, Darling Ingredients and Kyndryl to Enable AI

Valero’s 2025 partnership strategy for AI avoids high-profile collaborations with major technology firms, instead focusing on deepening ties with operational partners like Darling Ingredients and leveraging infrastructure specialists such as Kyndryl. This approach is designed to build targeted, internal capabilities and maintain control over proprietary operational data, rather than outsourcing core intelligence.

Diamond Green Diesel JV with Darling

The ongoing Diamond Green Diesel joint venture with Darling Ingredients serves as the primary vehicle for applying AI in the challenging renewables sector. The recent $315 million investment in a joint SAF project solidifies this partnership as the strategic core of Valero’s energy transition efforts. Within this venture, AI is not an add-on but a fundamental tool for managing the operational and financial complexities of producing low-carbon fuels from recycled feedstocks.

Kyndryl for Foundational Infrastructure

The relationship with Kyndryl highlights Valero’s strategy of engaging specialists for the foundational IT layers required for enterprise AI. By relying on Kyndryl for expertise in building robust and compliant IT systems for trusted data, Valero frees up internal resources to concentrate on the application of AI to solve specific refining and renewables challenges. This ensures the underlying data infrastructure is sound without distracting from core business objectives.

Table: Valero Strategic Partnerships for AI Enablement (2025)

US-Centric Deployment, Valero AI Initiatives at Port Arthur and St. Charles

Valero’s artificial intelligence strategy is heavily concentrated within its United States operational footprint, with key 2025 projects targeting specific, high-value refinery and renewables sites in the Gulf Coast region. This geographic focus allows the company to develop centers of excellence and apply learnings from these key sites across its wider network, rather than diluting its efforts across its global portfolio.

2025 Gulf Coast Focus

In 2025, Valero’s AI-enabled activities became highly localized at strategic assets critical to its future growth.

• The scaling of Sustainable Aviation Fuel production workflows is centered at the company’s Port Arthur, Texas facility, establishing it as a key hub for its advanced biofuels business.
• The new St. Charles FTC (Feedstock Treatment and Conversion) project in Louisiana is another major initiative where AI-driven process controls are essential for managing feedstock flexibility and maximizing processing efficiency.
• This concentration of advanced technology in the Gulf Coast creates a powerful feedback loop, where operational data from these projects can be used to refine AI models and improve performance across its entire system of 14 refineries.

From Pilot to Profit Driver, Valero’s AI Maturity and Commercial Applications

In 2025, Valero’s approach to artificial intelligence matured from exploration and pilots to a core commercial tool applied at scale to solve urgent financial and operational problems. The company is not focused on developing novel AI models but has become a sophisticated implementer of established AI techniques like predictive maintenance and process optimization, demonstrating a clear path from technology adoption to bottom-line impact.

Established Industrial AI Applications

Valero is deploying proven industrial AI applications with well-understood returns, a pragmatic strategy that contrasts with the more speculative AI research pursued by some competitors like Shell or Total Energies.

• The company is actively using AI-powered predictive maintenance systems to monitor critical rotating equipment, including compressors and pumps, across its facilities. These systems analyze real-time sensor data to detect early signs of failure, allowing for proactive maintenance that reduces costly unplanned downtime.
• This application of AI directly enhances Overall Equipment Effectiveness (OEE) and is a core component of its strategy to protect margins in its legacy refining business.

AI in Emerging Renewables Processes

The newest and most strategically critical application of AI is within its renewables segment, where the technology is still maturing but is vital for success.

• In its Diamond Green Diesel venture, AI is applied to optimize complex feedstock blends and ensure production processes meet stringent carbon intensity and quality specifications.
• This application is a direct response to the segment’s 2025 financial losses, positioning AI as a necessary tool to make the company’s energy transition strategy profitable and sustainable.

SWOT Analysis, Valero’s AI-Driven Strengths and Execution Risks

The SWOT analysis for Valero reveals a company skillfully leveraging its formidable operational scale (Strength) with a pragmatic AI strategy (Opportunity) to defend against market volatility (Threat). However, its success is contingent on flawlessly executing complex new renewables projects and ensuring its internally focused strategy does not create a capability gap compared to more tech-forward competitors (Weakness).

Table: SWOT Analysis for Valero AI Initiatives (2025)

Valero 2026 Outlook, SAF Project Execution and Predictive Maintenance Scaling

The critical factor to watch for Valero into 2026 is the operational and financial performance of its $315 million SAF project. Its success or failure will serve as the ultimate validation of the company’s strategy of using pragmatic, operational AI to de-risk its pivot into the energy transition and prove that an incumbent refiner can profitably scale new, complex fuel technologies.

If the SAF Project Hits Targets…

If the SAF project with Darling Ingredients meets or exceeds its production and efficiency targets in late 2025 and early 2026, watch for Valero to accelerate its capital allocation toward renewable fuels. This would be a strong signal that its AI-driven optimization model for new technologies is a repeatable and scalable blueprint, likely prompting announcements of further SAF or renewable diesel expansion projects.

Watch for Predictive Maintenance Data

A key signal of the core strategy’s success will be the disclosure of specific metrics related to operational reliability. If future earnings calls or sustainability reports detail measurable reductions in unplanned downtime or maintenance-related operating expenses across its refinery fleet, it will validate the ROI of the company’s less visible but highly impactful predictive maintenance programs.

Potential Strategic Shifts

Conversely, if the renewables segment continues to post operating losses despite the application of AI, it may indicate the challenges are more fundamental than process efficiency alone, potentially related to feedstock costs or market structure. In this scenario, watch for a potential pause in renewables capital spending or a strategic shift toward acquiring external technology or expertise more aggressively, moving away from its current internal-first approach.

The questions your competitors are already asking

This report covers one angle of Valero’s AI strategy. The questions that matter most depend on your work.

• US sustainable aviation fuel projects
• Profitability challenges in renewable diesel
• Predictive maintenance technology providers for refineries
• Competitor AI strategy in renewable fuels

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