Taiwans Chinese Petroleum Corp. isjoining thegrowing list of Pacific Rim refiners vowing to build capacity for premium base oils. The company said this week that it will build a 5,000 barrel-per-day plant,primarilyto makeGroup II base oils, by early 2008.
Another Taiwanese company, Formosa Petrochemical Corp., and Malaysias Petronas announced plans to build Group III plants within the past five months. Chinas Sinopec opened a Group II plant last year and is scheduled to open a second next year. In addition, South Korean refiner SK Corp. opened its second Group III plant last summer and says it is already developing plans to build a third.
CPC acknowledged being somewhat daunted by the volume of prospective capacity, but said it felt compelled to ensure its own supply.
This is a major concern – that, in the 2007 time frame, too many new plants will be built, Lin Chen-Yi, export manager for the companys lubricant business,told Lube Reportyesterday. But we still need to upgrade the base oil we produce because we are the leading lubricant company in Taiwan.
An analyst in the region said there is good reason for Asian companies to continue building premium base oil capacity. Phillip Logan, managing director of the Singapore-based consulting firm Etonwood Pte. Ltd., noted that supply in the region has been quite tight for a year or more.
Asia will still be a growth area for base oils and is adding more than 350,000 [metric] tons of base oil demand each year, Logan said. With no new plants coming on line before the 06 to 07 time frame, the market in the region will continue to be tight. So it makes sense that some new plants will be built, and if you build a new plant, these will certainly utilize the latest technologies and be targeted to higher performance base oils, even though there is still strong demand for Group I products in the region.
CPCs plan was first announced by Chevron Lummus Global, which issued a press release Friday stating that the refiner has licensed its Isodewaxing technology and catalyst to build a grass-roots plant at the Talin refinery in Kaohsiung, Taiwan. The plant will be able to make Group III base oils, although the primary focus will be on Group II and Group II-plus. Base oils will account for 4,000 b/d of capacity, with the remaining 1,000 b/d beingwhite oils.
Chevron Lummus is a joint venture between ChevronTexaco and the Swiss engineering firm ABB Lummus Global and a leading provider ofhydroprocessing and wax isomerization technology.
CPC did not disclose the cost of the project, but said it expects the new plant to open in early 2008. The company currently produces Group I base oils with Shell through a three-decades-old joint venture that operates a 5,000-b/d plant near the site of the new plant.
Lin said CPC expects to keep about half of the base oil output from the new plant to use in its own lubricant business. That business produces approximately 500,000 metric tons of lubes per year, claiming 35 percent of the Taiwanese market. CPC plans to sell half of the output from the new plant to other lube blenders.
Formosa Petrochemical says it will build a 10,000 b/d Group III plant to open in 2007. Petronas plans to open a plant the same year with capacity to make 6,500 b/d, mostly Group III. Sinopec has said it will open a plant with capacity to make 7,700 b/d primarily ofGroup II stocks next year.