The Persian Gulf is set to become a significant new source of API Group III base oils following the commissioning phase of the new Neste-Bapco plant in Bahrain, a joint venture between Finnish refiner and marketer Neste Oil Corp. and Bahrain Petroleum Co.
Several sources have told Lube Report the plant began the start-up process of feeding fluid into the unit in late August and also recently completed initial production of base oils, but work is continuing to bring the products to specification.
Neste is remaining tight-lipped about precise production dates and declined to comment. “We will communicate the startup of the plant with a press release (and) shipments will take place during the second half of this year,” said Ulla Kotila, market development, base oils, at Neste. The comments are in contrast to earlier statements by Bapco CEO Faisal Al Mahroos that shipments would commence in October. A separate source told Lube Report that initial shipments could arrive in Europe as soon as October, and another said product could reach the U.S. Gulf Coast by December.
“When you start-up a new unit, what comes out is not automatically on-spec. You have to ramp up, feel out the operating parameters like temperatures ranges run a while and see how the cuts come out. It takes about two months before you get product out that can be used and shipped,” one source remarked.
Political unrest in the Persian Gulf had delayed the opening of Neste-Bapco plant, and Kotila acknowledged the impact of recent protests in Bahrain. “The project has suffered some delays due to unrest in the region (but) completion is still scheduled for 2011.” Bahrain has been the epicenter of protests in the Gulf that have claimed dozens of lives amongst the country’s majority Shia population.
Under the terms of the joint venture Bapco will operate the plant and Neste will be the marketer of the output under the NEXBASE brand. The plant will produce very high viscosity index base oils but will not produce finished lubricants.
“We have chosen to concentrate on Group III base oils because the market is growing for high-quality base oils due to fuel economy requirements and tightened specifications,” added Kotila. The Middle East has historically lagged behind the global migration towards higher specification Group II and Group III products and remains predominately a Group I market. The Bahrain plant is the first mineral oil refinery in the region that is not Group I, and according to analysts is likely to be an important addition to the global supply chain. Citing good feedstock availability and proximity to Asia, several other regional base oil producers are said to be planning Group III plants, a move that could radically alter market dynamics as the Middle East tries to position itself as an export hub.
Underlining Neste-Bapco’s own export focus, previous press reports suggested that as much as five years of production had been sold to a major customer. However, Kotila downplayed the comments, saying, “We are not able to comment (on) any issues related to our customers as our customer relationships are confidential.”
According to Neste the base oil plant will be able to produce 400,000 metric tons of per year (7,700 barrels per day) when fully operational. Neste Oil owns the majority share at 45 percent, with national oil companies Bapco and OGHC (Nogaholding) each holding 27.5 percent.