Sinopec May Shutter Yanshan Plant

Sinopec is considering closing its API Group I base oil plant in Yanshan, China, early next year due to difficulties obtaining feedstock.

The state-owned company is looking for other sources of feedstock but will decide in the next few months whether to close the 250,000 metric ton per year plant during the first quarter of 2016, an official told Lube Report Asia Friday.

The base oil plant uses feedstock from our Yanshan refinery, which uses crude from the Daqing oilfield, said Zheng Lianquan, base oil purchasing supervisor with Sinopec Lubricants. Daqing crude is very good for base oil production, but the problem is that output from the oilfield is declining.

Yanshan has a second base oil unit, a Group II facility that has never operated. Construction of the Group II unit, which also has capacity of 250,000 t/y, was completed in late 2013 or early 2014, but the company has not started it because of market conditions.

The Group II market is over-supplied, so prices are too low and [production] cost is too high, Zheng said. We still intend to start up the plant at some point, but we have made no decision about when that will happen.

Group II base oils are more highly refined than Group I stocks, so they are less sensitive to the type of crude used.

A Sinopec research company is studying the question of what other crudes could be used for the Group I plant. If production at the Group I plant is halted, the company could still restart it at a later date, Zheng said.

Yanshan is one of five base oil plants operated by Sinopec. Sinopec and PetroChina, another state-owned oil and gas company, are the nations two largest base oil producers.