Profiling the World’s Best Base Oil Plants


JERSEY CITY, N.J. – The four best lubricant base oil refineries in the world arent the newest – two are solvent refiners and two use hydrocracking technology – but they are very, very cost efficient.

When it comes to maintenance cost efficiency, the worlds four best base oil refineries spend just half of what, on average, all the others spend, Jamie Brunk of Solomon Associates told the ICIS Pan-American Base Oils & Lubricants Conference here last week. Best performance does not require the latest technology. Rather, it depends on sustainable best practices and effective management.

Brunk, a senior consultant in Solomons Dallas, Texas, office, had analyzed 16 years of data covering about half of the worlds paraffinic base oil capacity to identify the worlds four best base oil plants, according to Solomons competitive and efficiency metrics. While the plants remained anonymous, one is in North America, one is in Europe, and two are in Asia.

I hear, old plants arent going to last, Brunk said, but weve studied the data, and there is no correlation between age and performance. The best plants are similar in performance despite big differences in age.

However, the worlds best base oil plants are larger than average, taking advantage of economies of scale. What do the best look like? They run heavier, poorer crudes than the others, with 76 percent of their crude coming from the Middle East. But unlike the others, they make more high-value products. Fifty-six percent of their feed goes to high value products, compared to just 41 percent for others. And nearly 70 percent of their base oils and other specialties are high quality API Group II/III stocks, compared to only 30 percent for the others.

Critically, said Brunk, they are very efficient. They spend only about half what others do on operating expenses, and their return on investment is 16 percent higher. Seventy-five percent of their operating expense advantage is due to operating efficiency; the plant managers control operating expenses.

Anyone can cut maintenance expenses, Brunk continued, but its not sustainable. The best plants improve operational availability – the percent of time the refinery is available to operate-and costs come down. They manage turnaround costs carefully, but they do not stretch turnaround intervals as much as others.

Looking at personnel, Brunk found that the worlds best base oil plants operate with only half the work hours as the others on average, and the best plants have relatively more technical personnel. At the same time, said Brunk, the best refineries have not cut personnel to the bone. Their manpower costs have increased at just over 2 percent per year, while others increased at 3.4 percent.

Economy of scale matters, and age does not, Brunk concluded. The worlds best base oil refiners control cash expenses better than the rest of the world. They dont have flavor-of-the-month programs. They have sustainable practices. While theres no limit on how bad you can be, Brunk noted wryly, the best plants invest and embrace the future.

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