NewsFlashMarathon confirms US base oils exit

23 April 2008 16:37  [Source: ICIS news]

HOUSTON (ICIS news)--US base oils producer Marathon confirmed on Wednesday it would permanently shutdown the Catlettsburg lube plant in Kentucky prior to year end.

“Prior to year-end, Marathon will discontinue the production of all base oils, slack waxes and extracts and will permanently shutdown the Catlettsburg, Kentucky lube plant,” said Linda Casey, a Marathon spokeswoman. “Until that time, we will work to fill orders for lube plant products,” she added.

The plant produces 6,700 bbl/day of Group I paraffinic base oils, according to data from the National Petrochemical and Refiners Assosciation (NPRA).

Marathon's confirmation follows widespread speculation that market conditions would force the company to exit the market this year, as reported by ICIS news.

Sellers have cited high feedstock prices for crude and vacuum gas oil (VGO) as a key reason to divert production from base oils and therefore limit supply.

“Finished products specifications and commodity markets have changed significantly over the past few years,” Casey said. “It has become increasingly difficult to compete and address these changes without additional large capital investments.”

Other Group I sellers have admitted to cutting production rates due to the high cost of feedstocks.

Crude oil, which hit an all-time high of just over $119/bbl yesterday, is 89% higher than it was one year ago, according to global chemical market intelligence service ICIS pricing.

The Marathon announcement follows news earlier this month that producer Citgo would reduce merchant base oils availability.

Earlier this month, Citgo informed customers that it plans to reduce production at its Lake Charles, Louisiana, lubricants and wax refinery to concentrate on its finished lubricants business, sources said. The plant produces 9,500 bbl/day of Group I paraffinic base oils according to the National Petrochemical and Refiners Association (NPRA).

Marathon produces 6,700 bbl/day of Group I paraffinic base oils. Other group I sellers include ExxonMobil, Citgo, Sunoco, Calumet, Valero and Ergon.

By: Heather McGuire Doyle
+1 713 525 2653

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