Base Oil Plant Studied in Brazil

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Two energy start-up companies – Houston-based Oil Group Investments and Rio de Janeiro’s EnP – have agreed to study the feasibility of developing a base oil plant and small fuels refinery in southeastern Brazil.

Officials said they are targeting a late 2022 start-up date for the base oil plant, which would open with capacity to produce 1,000 barrels per day but would be expanded later to 5,000 b/d.

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Oil Group says the project is part of its strategy to develop small refineries close to its feedstock sources – an approach that it considers efficient and economical. It plans to build the facilities in the state of Espirito Santo, on the Atlantic Coast just north of Rio de Janeiro.

“The area where we are going to install the plant, they have some availability of heavy crudes that are currently processed far, far away, in the northern part of the country, some 2,000 miles away,” Oil Group Managing Director for Corporate Development and Investor Relations Gustavo Zummel said during a phone interview Tuesday. “Decades ago that may have made sense for a national oil company, but most of the consumption happens in the south, so the finished products have to come back that same distance. It’s not necessarily the most efficient way.”

Brazil currently has three virgin base oil plants, all owned by state energy company Petrobras, but two are part of refineries that are currently up for sale. President Jair Bolsonaro’s administration is selling off eight refineries to raise money, to help privatize the oil industry and to enable Petrobras to focus more on oil and natural gas exploration.

The joint venture with EnP is one of six refining projects that Oil Group is working to develop. The company, founded in 2013, also owns rights in several on- and offshore oil fields. EnP was formed this year with a goal of becoming a platform for the development of regional “energy ecosystems.”

The Espirito Santo refinery would have capacity to make 30,000 b/d of gasoline, diesel, marine diesel and fuel oil, while the base oil plant would also make asphalt. The companies declined to disclose cost estimates.

Zummel said the companies still need to obtain environmental permits. He acknowledged that the process is difficult but said Oil Group has experience with the process and is confident that it can obtain them by the end of 2021. The joint venture would then aim to build the modular facilities in one year.

He added that there is a strong need for more fuels and base oil production capacity in Brazil because the country now imports about one-third of the oil products it consumes and has a small amount of base oil production capacity compared to its level of lubricant consumption.

The companies are not concerned about the COVID-19 pandemic threatening the feasibility of the project, he said.

“The need for transportation fuels and other products will remain strong, and our backers take a moderately long-term view on their investments,” he said.

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