Shell Accelerates Refinery Contraction

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Royal Dutch Shell has accelerated its timeline for reducing the crude oil throughput capacity of its refinery on Singapore’s Pulau Bukom island. That reduction – which the company has said would cause the closing of the refinery’s base oil plant – is now due to be completed in July.

Moving up the shutdown of the base oil plant could exacerbate a base oil supply shortage that has developed around the world in recent months.

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The Pulau Bukom refinery currently has capacity to process 500,000 barrels per day of crude and its base oil plant to produce 386,000 metric tons per year of API Group I base stocks. Last year Shell announced that it would halve the crude processing capability as part of a plan to introduce production of renewable refined products.

Originally the company said the cutback in overall operations would be completed by the end of 2023. As originally reported by Argus Media, the company now says that the timeline has been accelerated. A spokesman told Lube Report today that crude processing capability will be reduced to 300,000 b/d by July of this year.

The spokesman could not confirm if the base oil plant would close at the same time.

Base oil shortages developed in the latter half of last year because of the COVID-19 pandemic. The economic impacts of lockdown and other containment measures did reduce demand somewhat, but supply fell more because of cutbacks in oil refinery operations, undertaken because of sharp decreases in fuels demand.

As a result, base oil prices and profit margins have increased drastically. In numerous markets, lubricant blenders are encountering difficulty finding some grades of base stocks for spot purchase. The situation has been exacerbated by other supply disruptions, including planned temporary plant shutdowns and unplanned outages caused by severe weather.

ExxonMobil ceased operations of its Group I base oil plant in Singapore around the middle of 2020, saying it was part of efforts to cut costs during the pandemic. At the time the company said it would decide later if and when to reopen the unit.