Valero Energy Corp. has reconsidered an earlier plan to close its Paulsboro, N.J., base oil plant as early as 2007. According to market sources, the company is telling customers it now plans to operate the 11,500-barrel-per-day facility through 2009 and perhaps beyond.
The new stance was attributed, at least in part, to Valeros purchase of four refineries from Premcor Inc. last year, including one at Delaware City, Del., just 35 miles from Paulsboro. Management believes the Delaware City refinery gives the company flexibility in the crude oil it uses on the East Coast, which had been the goal of shuttering the base oil plant.
Sweet crudes have high base oil yields, but their cost relative to sour crudes has risen the past few years, spurring fuels refiners to make increasing use of sour crudes. Valero is the largest fuels refiner in the United States. In January, while discussing the plan to close the base oil plant, the company added that it expects demand for Group I oils to continue falling in the future.
The Paulsboro base oil plant, the only base oil producer on the East Coast, is primarily a Group I plant. Group I oils account for 11,000 b/d of its 11,500-b/d capacity. Its remaining capacity is devoted to Group II.
Base oil production in the United States and Canada has been shifting from Group I to more highly refined stocks, with several Group I plants closing in recent years. Most observers predict at least one more Group I plant will exit the market in the foreseeable future.