Shell Mulls Group II in Singapore

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Shell Mulls Group II in Singapore
A view of the Shell refinery at Pulau Bukom in Singapore. © NurPhoto via AP

British energy giant Shell is considering building an API Group II base oil unit at its refinery on Singapore’s Pulau Bukom island, apparently at least in part to supply its nearby finished lubricant plant on the nation’s main island.

A company spokesperson confirmed the project after it was listed in a slide on Shell’s Feb. 3 presentation for its 2021 earnings.

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A final investment decision has not been made on the project, and Shell did not discuss its capacity. The slide indicated that the plant would not be built before 2025.

“Singapore is an important market for Shell and a strategic hub for our lubricant operations,” the Shell spokesperson told Lube Report in response to an inquiry about the project. “In 2017, Shell opened a 10-hectare integrated lubricants and grease production facility in Tuas, which is Shell’s third-largest lubricants plant in the world.” The plant in Singapore’s Tuas planning area has capacity to make 390,000 metric tons per year of lubes.

“Shell continuously reviews its manufacturing portfolio and market developments in terms of lubricants and base oil requirements, and assess the opportunities to enhance the competitiveness, quality, and robustness of our lubricants business,” the spokesperson continued. “For that purpose, we are exploring an option to produce higher quality base oils to support Shell Lubricants’ growth ambitions in the Asia Pacific region.”

Shell’s fuels refinery on Pulau Bukom includes a Group I base oil plant with capacity of 386,000 t/y, but the company plans to close that facility this year. Last year it reduced the crude oil throughput capacity of the overall refinery from 500,000 t/y to 300,000 t/y as part of a strategy to add production of greener fuels and reduce its carbon footprint in Singapore.

One industry analyst said it makes sense for the company both to close the Group I plant and to build a Group II facility. SBA Consulting principal Stephen B. Ames said by-products of Group I plants, such as aromatic extracts and slack wax, are relatively unprofitable to produce in Singapore because of a lack of nearby processing facilities.

But Shell, the world’s largest finished lube marketer, does need base stocks, he said. “They are short on base oil and Group II is what they need. They certainly have plenty of Group III.”

Shell’s other base oil assets are joint ventures. Shell-Qatar Petroleum in Ras Laffan, Qatar, operates the world’s largest gas-to-liquid refinery, with capacity to produce 300,000 tons of Group II and 1.1 million tons of Group III base oils. A 40-60 partnership with Hyundai Oilbank in Seosan-si, South Korea, has capacity to make 1.3 million t/y of Group II stocks. Sapref, a 50-50 JV with BP in Durban, South Africa, has a 172,000 t/y Group I plant.

In this past decade, Shell closed base oil plants in Montreal, Canada, and Pernis, Netherlands.

Ames added that Singapore is a good location to build a Group II plant because the country has finished lubricant blending plants and lubricant additive production, meaning it is logistically efficient to make lubricants there.

“I believe this plant would be for internal use,” he said. “Their big blending plant for the region is right there in Singapore, and you have additives locally so it’s cost-efficient if you have base oil production there and then blend the lubricants right there.”

– Tim Sullivan contributed to this article.