Chevron Buys Neste Base Oil Business


Chevron Buys Neste Base Oil Business
© Sundry Photography

Neste has agreed to sell its API Group III business to Chevron, the companies announced Monday, a deal that expands Chevron’s presence in the growing Group III market.

The transaction appears driven partly by Neste’s shift away from petroleum products and signals the deconstruction of what was once one of the world’s largest Group III suppliers.

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The companies did not disclose the price for the sale, which transfers the Nexbase base oil brand to Chevron, along with associated qualifications and approvals. Chevron also gets the business that is selling and marketing those base oils.

A news release distributed by Neste said the deal also includes a long-term agreement for Neste to supply Chevron with base stocks produced by its refinery in Porvoo, Finland, which has capacity to make 250,000 metric tons per year of Group III. Chevron’s own news release did not mention a supply agreement, and Neste did not specify the length of the agreement.

The sale does not include Neste’s stake in a 400,000 t/y Group III joint venture in Manama, Bahrain, as Neste said it is exiting the venture. Neste holds a 45% stake in the joint venture, and its partners are Bahrain Petroleum Co. and an agency of the Bahrain government, Nogaholding.

Chevron’s announcement indicated that its focus is on the Nexbase brand.

“We expect the addition of the Nexbase brand and associated business to provide value to our customers through improved logistics, reduced complexity and optimized solutions,” Chevron Base Oils General Manager Alicia Logan said. “This acquisition is poised to satisfy our customers’ growing needs to meet increasingly stringent lubricant standards driven by evolving vehicle specifications ….”

Modern industry and original equipment manufacturer performance specifications for passenger car engine oils increasingly require the use of Group III, Group III+ and even polyalphaolefin base stocks. Oils promoted as meeting such specs are supposed to contain base stocks that hold approvals indicating that engine oils formulated with them have been tested and certified as meeting them. For that reason, Group III oils that do hold certifications are sold at price premiums.

Neste has been focusing much of its energy on reducing its carbon footprint and becoming a supplier of fuels and plastics that help other companies become more sustainable. In doing so it has been paring back its operations in traditional petroleum. Last year it announced it would scale back operations at Porvoo and close another oil refinery in Finland.

Neste was once one of the largest suppliers of Group III base stocks with ambitions to become an even bigger market player. For a time it had a deal similar to its Bahrain joint venture to ally with Abu Dhabi National Oil Co. on development of a Group II and III base oil plant in the United Arab Emirates, but that deal fell through by the time the facility opened.

Relations with Bapco soured, and the companies went to arbitration to settle a dispute over their relationship.

Neste has also allied with Chevron in ways that may have smoothed the way for the sale of the base oil business. “Most recently, Neste launched a new Group III 4 centiStoke, a blend of its Group III and renewable molecules from U.S.-based Novvi, a joint venture of Chevron, Cosan, Amyris, American Refining Group and H&R USA,” Geeta Agashe, president of Geeta Agashe & Associates LLC, noted in an interview. “Prior to this, Neste had bolstered its Group III supply in mid-2019 through an exclusive agreement with Chevron from its Richmond refinery in the U.S. These supplies are also sold as original equipment manufacturer-approved Nexbase.”

The base oil plant at the Richmond, California, refinery has capacity to make 1,036,000 t/y of Group II and 49,000 t/y of Group III. Neste declined to say how much Group III Chevron has been making on its behalf.