Yanshan Joins Group III Ranks

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Yanshan Joins Group III Ranks
Workers at Sinopec Yanshan Petrochemical Co. on the outskirts of Beijing. © AP Photo/Mark Schiefelbein

Sinopec’s Yanshan Petrochemical Co. has begun producing API Group III base oils, joining the growing list of Chinese refiners that claim to make Group III oils.

The facility, which is located in Beijing, produced 3,500 tons of Group III during April, seven months after starting up a new hydrogenation unit, according to an article published last week by Shanghai-based publisher and conference organizer Intex.

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Sinopec officials did not respond to questions by deadline.

Several Chinese base oil refiners claim to have added Group III capacity the past few years, seeking to offer local alternatives to a market that was heavily dependent on Group III imports. China has a large surplus of Group II capacity, but until recently produced little Group III. The market’s demand for Group III has been steadily increasing as the quality of finished lubricants consumed in China rises.

At least six refineries in the country now claim capacity to make Group III oils. Sinopec has one other plant that makes Group III – its refinery in Maoming since an upgrade completed in 2016. China National Offshore Oil Corp., another state-owned oil giant, began making Group III at its plant in Taizhou late last year and said recently that it will expand the site’s capacity to do so.

Independents Hengli Petrochemical and Qinghe Chemical Technology launched Group III production in 2019 and 2020 at facilities in Dalian and Zibo, respectively, and state-owned coal company Lu’an Group started making Group III at its coal-to-liquids facility in Changzhi in 2018.

While seeking to take advantage of a market opportunity, the refiners have also touted their investments as furthering a government goal of reducing dependence on imported petroleum products. Industry analysts predict China’s demand for Group III will continue to increase and that domestic companies will install more Group III capacity.

The introduction of Group III supply at Yanshan is part of a drawn-out upgrade of that base oil plant. In the early 2010s, the refinery had a plant with capacity to make 250,000 metric tons per year of Group I, but that train closed around the start of 2016. The company had finished building a 250,000 t/y Group II plant in 2013 but did not start it because of feedstock supply issues and later because of healthy margins for fuels.

Improving margins for base oils and a decline in margins for fuels eventually turned the refinery’s attention back to the former. Installation of the hydrogenation unit raised the plant’s capacity to 450,000 t/y, though that includes white oils not used in lubricants. Officials have not provided a capacity breakdown between Group II, Group III and white oils, possibly because they are still making adjustments to processes.

The company said that in December it succeeded in making base oil and white oil using feedstock from high-sulfur crude. Officials have said they plan to increase Group III output according to market demand.

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