CNOOC Prepares Group III Expansion

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CNOOC Prepares Group III Expansion
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China National Offshore Oil Corp. is finalizing plans for a large base oil expansion at its refinery in Taizhou, Jiangsu province – part of an effort to make China more self-sufficient in materials needed to make high-qualify lubricants.

The project would have capacity to make 600,000 metric tons per year of API Group II+ and Group III, along with other materials such as white oils. Officials say the refinery already has capacity to make 800,000 t/y of those materials.

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Li Yuhua, CNOOC Taizhou general manager for the lube business, confirmed that the project has a price tag of ¥3.5 billion (U.S. $551 million) and said the company is expected to give final approval in late April.

The company is already years into an initiative to help make China self-sufficient in base stocks needed to make high quality finished lubricants. Chinese refiners have opened huge new slugs of base oil capacity in recent years, but most of those facilities make Group II oils. Imporst still meet most of the country’s Group III requirements, although a few refiners have now added Group III capacity.

The company did not provide a Group II and III breakdown for the project being planned. It did say that the 600,000 t/y total includes white oils, oil drilling fluids and process oils. Late last year the Taizhou refinery announced that had achieved the ability to make relatively small amounts of Group III – 20,000 t/y. It was not clear then if that capability was the result of process changes or installation of new equipment and technology. Previously the refinery had capacity to make 410,000 t/y of Group II and 200,000 t/y of naphthenic base stocks.

The project planned now involves significant capital investment. Li said the company’s achievements making Group III and the base oil marketing experience it has gained has given it confidence to proceed with the new project.

The expansion would have a target completion date in 2023. The company said it would enable the refinery to produce food-grade white oils and white oils used to make vaccines for animals – materials that China mostly imports today.

CNOOC claims that its base oil operation in Taizhou has an advantage over its big two state-owned rivals – Sinopec and China National Petroleum Corp., or PetroChina – insofar that it does not rely on imported crude oils.

“CNOOC has the crude oil resources to supply itself with feedstock, and it helps cut the cost significantly,” he said, adding the advantage was particularly beneficial during times when crude oil prices are so high. CNOOC gets paraffinic crude oils from the South China sSea and naphthenic crude oils from the Bohai sSea.

The Taizhou facility produces much lower portions of diesel than fuels refineries that house most mineral base oil plants. Diesel is made using the same feedstock as mineral base oils, and most refineries are limited in the degree to which they can shift feedstock away from diesel production to base oils. “CNOOC Taizhou doesn’t have [that constraint] because it only does lubes and aviation fuels,” Zhang said. “That’s why it can give the lube business the best oil resources.”