S Korea's S-Oil expanding to double premium base oil capacity

08 February 2010 22:29  [Source: ICIS news]

HOUSTON (ICIS news)--South Korea’s S-Oil is banking on tremendous growth for Group III base oils and plans to be ahead of the curve with an expansion that will double its capacity for premium base stocks, a company official said on Monday.

The base oil refinery in Onsan, South Korea will begin a turnaround at the end of February that is expected to last until early April.

“During the turnaround, we will make internal modifications and additions, as well as a catalyst change to prepare for the expansion,” said H. Shin, vice president of lubes sales. “When the turnaround is complete, base stock capacity for Group III base oils will be almost doubled.”

Shin could not give an exact figure for the new capacity, because production at the lube units is flexible.

The refinery currently produces 15,000 bbl/day of Group II base stocks and 9,000 bbl/day of Group III base stocks, according to industry reports.

Shin said the base stocks will be sold in Korea, Japan and the US, where Group III demands are currently the greatest.

“We are also looking at the amazing growth opportunities in emerging markets like India and China,” Shin said.

Despite its fast growing economy and booming market for automobiles, China currently does not produce Group III base oils.

Chinese producer Sinopec has said recently that continued higher quality requirements in the automotive lubricant market would drive up the usage of group II and III base oils in China, Shin added.

Sinopec produces Group I and II base stocks, which are used in lower-quality engine oil formulations, in China.

The US also has very little Group III base oil production as most material is imported from S-Oil or SK Lubricants, also in Korea.

“The market is evolving and the switch from Group I to Group II and now to Group III base stocks is faster than ever,” Shin said. A major concern of the auto industry is engine oil longevity and that is driving the demand for Group III base stocks.”

In the US, S-Oil’s base stocks are sold through a supply agreement with ConocoPhillips.

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By: Heather McGuire Doyle
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