IOCL Plans Another Base Oil Plant

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Indian Oil Corp. Ltd. plans to build an API Group III base oil plant at its refinery in Panipat – part of a broader expansion of the northern India complex. It is one of four such projects now in the pipeline for India, which has been one of the world’s largest base oil importers.

Chevron Lummus Global disclosed the Panipat base oil project Tuesday in a press release stating that it has licensed catalytic dewaxing and related technologies that will be used to make Group III. Indian Oil did not respond by deadline to questions about the plant.

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Indian Oil did disclose in a Feb. 26 stock exchange filing an investment proposal to expand the crude oil throughput capacity of the overall refinery from 15 million metric tons per year to 25 million t/y. The filing indicated the expansion, including a catalytic dewaxing unit, would cost an estimated Rs 32,946 crore (Rs 329.5 billion or U.S. $4.4 billion) and was expected to be commissioned by September 2024.

The refinery’s expansion would improve its operational flexibility to meet domestic energy demand and would enhance its petrochemicals production capability. “The increased production of petrochemicals and value added specialty products would not only improve the margins but also de-risk the conventional fuel business of the company,” the filing stated.

CLG said in its April 13 news release that it received a contract from Indian Oil for the license, basic engineering, proprietary equipment and catalyst, along with technical services. The base oil plant will employ CLG hydrocracking, wax isomerization and hydrofinishing technologies.

“The catalytic dewaxing unit will be designed to produce mainly premium API Group III base oils by processing unconverted oil from an upstream hydrocracking unit,” Tuesday’s press release said. “The unit is expected to bring significant benefits to the region by minimizing existing dependence on imported base oils.”

India is the world’s third-largest lubricant industry, consuming roughly 2.5 million t/y of finished products, but it has only four base oil plants with combined capacity of 1.2 million t/y, forcing the industry to import large quantities of base stocks. Hindustran Petroleum Corp. Ltd.’s Mumbai plant has the only Group III capacity – just 25,000 t/y.

Indian Oil currently operates a base oil plant in Haldia, in the state of West Bengal, with capacity to make 130,000 t/y of Group I and 120,000 t/y of Group II oils. Indian Oil subsidiary Chennai Petroleum Corp. Ltd. operates a 270,000 t/y Group I plant in Chennai.

Indian Oil said in a September 2020 stock exchange filing that its board of directors approved a project to construct a 235,000 t/y base oil plant at its Gujarat refinery as part of a petrochemical and lube integration project. The filing didn’t disclose what type of API group of base oil would be produced or a projected completion date. The project’s cost was estimated at Rs 17,825 crore.

In 2019, Indian Oil outlined plans to commission in 2022 a 270,000 metric tons per year base oil plant that would mostly produce API Group III stocks at its Haldia Refinery in West Bengal.

In September 2019, CLG announced it received a contract from Bharat Petroleum for the license and design of its hydrocracker and lubricant oil base stock unit to add API Group II or III capacity to its base oil plant in Mumbai. BPCL’s plant currently has capacity to make 180,000 metric tons per year of Group II base stocks.

Steve Ames of SBA Consulting in Pepperpike, Ohio, noted that the addition of more than 1 million tons of new base oil production capacity by the India base oil plant projects on the surface may appear seriously questionable, given the massive base oil surplus capacity that globally exists today – despite the current shortage of base oils due to low operating rates of the plants’ “mothership” refineries. “However, there is justification behind these moves: a) India is a huge importer of Group II and III and b) a 10% import duty,” Ames told Lube Report. “They should thus have an assured market for the additional output and a 10% improvement on their return on investment. The losers will be the current suppliers in the Middle East and Asia who will have to find alternative, lower margin markets under a no-growth scenario.”