Base oil plants across China are in the midst of a wave of expansions and upgrades. Most are being undertaken by the countrys three state-owned petroleum companies – Sinopec, PetroChina and China National Off-shore Oil Co. – but big, private companies are joining the trend.
One of them is Hainan Handi Sunshine Petrochemical Co. (HDS), a Hainan Province producer of base stocks and other petroleum products such as white oils and transformer fluids. In the first half of 2014, HDS plans to start construction of a new plant at its refinery on Hainans Yangpu Peninsula.
Get alerts when new Sustainability Blog articles are available.
With the new facility, we are expected to reach an annual production capacity of 1.5 million tons of API Group II+ and III base stocks, a great leap from the current 300,000 tons, Wu Hanling, HDS president, told Lube Report Asia in a recent interview.
The new facility, he added, will make three main viscosity grades of oil: 60 or 70 neutral, 150N and 500N base stocks. This is somewhat heavier than the current slate, which includes 70N, 100N, 150N and 400N.
The existing HDS plant makes Group II stocks. The company said it will achieve the upgrade by installing a more sophisticated hydrogenation unit, and the company is in talks with several multinational technology providers. Wu said the final decision should be made by the end of February.
The project costs about CNY4.8 billion (U.S. $769 million) and is expected to be completed within two years, according to Wu.
Like other refineries, HDS aims to produce higher grade base oils in order to meet the continuously growing demand for high quality engine lubes.
China has lots of base stock suppliers, but not so many can supply API Group II and III base oils, Wu said. Our goal is to be one of the top Chinese suppliers in this sector, serving the auto industry both in China and abroad.
Also, as environmental issues are getting more serious in China, there will be more regulations to encourage highly refined, eco-friendly motor oils in the future, he added.
China does appear to be moving forward with environmental protection. Air pollution levels in numerous parts of the country reached alarmingly high levels in recent months, and Zhou Shengxian, head of the countrys Ministry of Environmental Protection, vowed during a national meeting in Beijing last week to fight against environment issues with greater efforts.
Some of these will affect lubricants. Currently, all vehicles sold in China have to comply with the National IV pollutant emission standard, which took effect in 2011. The standard is adapted from the European emission standards, and Beijing plans to continue upgrading standards for cars and trucks in coming years. Use of higher quality engine oils is one of the ways in which vehicular emissions are reduced.
With more base stock capacity, global expansion is on HDSs agenda, with Southeast Asia, Europe and the United States at the top of its list of target markets.
We are planning to set up operations in these areas as soon as 2015. Meanwhile, we are also looking for qualified local sales agencies to help with our expansion, Wu said.
In China, where the big three state-owned oil companies dominate the market, large private refineries like HDS are a rare find. With his military background (he is a former soldier) and experience in oil trading, Wu is confident that his company has an advantage.
Differentiation is the key to compete in the market, he said. Aside from providing unique products, we also offer better quality at best prices.
Founded in 2006, HDS refines paraffinic crude oils from the Middle East. Aside from base stocks, it also supplies industrial grade white oils, highly refined white oils to the food and cosmetics industries, electrical transformer oils, process oils and naphtha.