Imperial Oil last week said it will stop base oil production at its Sarnia, Ontario refinery next year to focus on fuels. The plant has 2,800 barrels per day of API Group I and 3,800 b/d of Group II base oil capacity.
Following a strategic review, Imperial has decided to discontinue the manufacturing of lubricant base stock at its Sarnia refinery site, Imperial Oil spokesman John Harding told Lube Report. The transition is expected to occur by mid 2011. The plant produces base oil, process oils and wax.
Were making this move to improve the long term profitability of Sarnias operations, and to allow Imperial to take advantage of growing opportunities related to the manufacture and sale of fuel products, Harding explained. An example would be ultra low sulfur diesel in the North American market.
He noted the site has a blending and packaging plant that will continue to operate. We will continue to supply from Sarnia finished lubricants as we do today, using high quality base stock from other sources.
The plans will affect about two dozen employees, he said, and the company will redeploy them within the Sarnia site.
The refinery, which was commissioned in 1897, processes about 124,000 barrels per day of crude oil, according to Harding. ExxonMobil holds 70 percent of Imperial Oils shares.
The news comes on the heels of similar recent announcements by Shell and Caltex. Shell in early January outlined plans to convert its 130,000 barrels per day Montreal East refinery to a terminal. The refinery includes a base oil plant with 2,700 barrels per day Group I capacity. Caltex Australia in December said it will close its base oil refinery at Kurnell in Sydney at a date to be announced later. The 3,300 barrels per day API Group I plant is the last one in Australia.
Stephen Ames, principal of SBA Consulting, Pepper Point, Ohio, said Imperial Oils announcement wasnt unexpected.
Sarnia has been a constrained base oil operation for the past 3 years, Ames continued. In 2006, Imperial Oil changed to a sweeter crude slate so as to comply with the then new low sulphur limits for North American diesel. In doing so, they reduced base oil production and are believed to have been operating the base oil plant at roughly 70 percent of capacity ever since.
He noted that Imperials announcement states, The decision is being made in response to market conditions which are supporting more value to a full-time fuels manufacturing operation in Sarnia. This is similar to one of the reasons cited by Caltex in their announced plans to close the Kurnell, Australia base oil plant, Ames noted.
Having to run a paraffinic lube crude often detracts from yields and octane levels of the refinery’s gasoline production, especially if there is no offsetting distillate hydrocracking capability, he continued. Both Sarnia and Kurnell fit that description.