In anticipation of large volumes of Canadian crude coming to the U.S. Gulf Coast, Valero Energy Corp. (VLO) is expanding two of its Gulf Coast refineries to process larger volumes of heavy crude oil.

The company will be expanding its St. Charles refinery in Norco, La., and its Port Arthur, Texas, refinery by 2012.

"Canadian crude is going to end up on the Gulf Coast," said Bill Klesse, Valero's Chief Executive. Additional units will be installed to convert crude to diesel, which is currently seen as being more valuable than gasoline.

The $8.4 billion projects include installing a diesel-producing hydrocracker at both plants and expanding heavy-oil processing capacity with crude unit and coker expansions.

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