The halt of fuels production is part of Shell’s drive to reduce carbon emissions, but the energy giant said it is encouraged by strong demand in Western Europe for automotive oils and fluids in both traditional and electric vehicle segments, demand for data center coolants and white oil demand for medical and farming applications.

The refinery in Wesseling is part of Shell’s Energy and Chemicals Park Rheinland on the Rhine River which reaches from Wesseling to the nearby city of Godorf.

The company said the new new base oil plant will have capacity to make 300,000 metric tons per year of Group III oils and that it will open the facility in the second half of this decade.

“The repurposing of this European refinery is a significant step towards serving our growing lubricant customer base with premium base oils,” Shell Director for Downstream and Renewables Huiberto Vigeveno said in a Jan. 26 news release.

“We expect growth in the market for high-quality engine and transmission oils,” he added. “Going forward, new applications like e-fluids in electric cars and immersion cooling fluids for data centres will create further demand. Additionally, these base oils will also be used for medical white oils in life science and farming,” a Shell spokesperson said.

Cooling fluids are increasingly used to manage heat generated by computer servers housed in large warehouse-like buildings called data centers, an expanding field in the information technology sector.

The plant’s planned nameplate capacity will be equivalent to about 9% of current European Union demand and 40% of Germany’s demand for base oils, according to Shell.

The spokesperson said output from the converted Wesseling site will primarily be used in house but that the company will explore limited external sales opportunities. “The primary market for delivery will be Europe.”

An industry insider viewed the announcement against the backdrop of increased geopolitical tensions in the Middle East and disruptions of shipping through the Red Sea and Suez Canal.

“Prices for Group III base oils have been pushed up by the halted transit via Red Sea of freight deliveries of Group III from sources in South Korea and United Arab Emirates,” Denis Varaksin, base oil trader with the Berlin-based DYM Resources, told Lube Report on Monday.

He also confirmed that demand for Group III base oils in Germany is expected to stay strong long term “despite the switch to EVs.”

“Also, the market for computer server cooling fluids is getting hotter in Western Europe and in the United States,” Varaksin added.

A key aspect of the Wessleing transformation is the electrification of the newly established base oil plant.

Shell envisions a future where traditional crude oil processing for fuels at this site is replaced with cleaner, more sustainable practices. Shell said the conversion of the hydrocracker unit into production of Group III base oils is expected to reduce its operational carbon emissions, known as Scope 1 and 2 emissions, by about 620,000 t/y.

The company aims to cut overall greenhouse gas emissions, including those burnt by its customers, to net-zero by 2050. Its announcement to sell its refining and petrochemical site in Singapore is part of these plans.

The Rhine complex will continue to process crude oil. It has capacity to process 17 million tons of crude oil per year, of which Wesseling processes 7.5 million tons.