FocusUS Group II base oils grabbing supply attention

29 July 2013 20:22  [Source: ICIS news]

By Judith Taylor

HOUSTON (ICIS)--Whether it is considering the US and Americas market or contemplating potential forward implications in the global supply/demand lubricant sector, US Group II base oils are grabbing attention.

US Group II base oil supply is set to move, as are the changes this tier of production is set to create in the global lubricants’ market.

European sources say that increasing volumes of US Group II base stocks are entering the region, and players are scrambling to try to understand the potential changes that a significant entry of US Group II base oils might bring to the predominately Group I European supply area.

The advent of Group II has been talked about for several years as more stringent environmental requirements and an expanding slate of changing formulations and products are rapidly evolving in the US in order to meet new criteria in regulatory and emissions controls.

Production capacity addition discussions relevant to the Americas have been largely focused on Chevron’s Pascagoula, Mississippi, refinery project.  

Announced in 2008, the refinery is targeted for start-up in the fourth quarter of 2013.

Dubbed "The Pascagoula Base Oil Project", or PBOP, this facility is expected to produce approximately 25,000 bbl/day of premium Group II base oils. 

Chevron currently produces 20,000 bbl/day of Group II base oils at its Richmond, California, refinery.

PBOP’s presence underscores the need for significant additional volumes of Group II to enter the markets in the NAFTA (North American Free Trade Agreement) countries of the US, Mexico and Canada and to stretch toward new vistas offered by an increasing synergy with South America.

Chevron is not alone in the US and Americas in seeking - and finding - ways to bring more premium base oil production into this key global supply and consumption region.

In February 2013, ExxonMobil announced plans to expand Group II and II+ base oil production capacity at its Baytown, Texas, refinery.

Following completion of regulatory approvals and funding, construction on the expansion is scheduled to begin late 2013, with a 2015 target set for start-up of the base oil units, according to ExxonMobil’s announcement.

While no specific Group II base oil production volume expectation was released by the company, it did say the expansion will significantly increase its output of Group II and II+ base stocks.

Commenting upon the expansion, George Arndt Jr, general manager of global base stock and specialties for ExxonMobil Fuels, Lubricants & Specialties Marketing, said in the second quarter of this year: “We are committed to the base stock business and remain confident in our integration, technologies and product slate.”

ExxonMobil’s Baytown refinery currently has 9,800 bbl/day of Group I base oil production capacity and 11,700 bbl/day of Group II output. The company also has Group I and Group II base oil production in Baton Rouge, Louisiana.

According to most US market participants in base oil and finished lubricant production sectors, Group II base stocks are a necessary factor in moving ahead on formulations that can meet new regulatory and environmental performance requirements.

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By: Judith Taylor
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