Harburg Deal Draws EU Scrutiny

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The European Commission launched an in-depth investigation into Nynas proposed acquisition of Shells Harburg, Germany, refinery assets over concern the acquisition would eliminate naphthenic base oils competition in Europe.

Under the deal, announced in Dec. 2011, Swedish specialty oils refiner Nynas would take out a 25-year lease on Shell Deutschlands naphthenic and paraffinic base oil plant in Harburg. The plant has 3,000 barrels per day of naphthenic capacity and 3,300 b/d of API Group I paraffinic base oil capacity.

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The commissions initial survey of the proposed acquisition found that the deal would make Nynas the only producer of naphthenic base oils in the European Economic Area, which could also grant it a dominant share in the markets for naphthenic process oils and transformer oils.

No other competitor would remain to supply naphthenic oils for use in some end applications such as insoluble sulphur, industrial rubber, fertilizers, additives, and defoamers, the commission stated. With respect to other segments, including industrial greases, metalworking fluids, adhesives, cold-set inks, and transformer oils, the few remaining competitors who are importing into the [European Economic Area] may not exercise a sufficient competitive constraint.

The proposed merger would remove the only competing producer of naphthenic base oils in the European Economic Area, said Joaqun Almunia, the European Commissions vice president in charge of competition policy. The commission needs to make sure that it would not raise production costs for European companies as well as prices for the customers of the various end products.

In the statement, the commission pointed out that the decision to conduct the investigation does not prejudge its result. The commission has until Aug. 8 to make its final decision on whether or not to approve the deal.

Nynas Communication Director Hans stlin told Lube Report that Nynas expects a positive outcome. As soon as we have studied the issues raised by the commission in detail, we will collaborate further with the commission to substantiate our application and to achieve an approval, stlin said.

Nynas announced at the time of the original agreement that it would likely rebuild the Hamburg site into a 330,000 t/y specialty oils refinery. The company also mentioned at that time that it was most interested in the plants naphthenic output, and that the deal would allow it to close its competition gap with top pale oil supplier Ergon. Ergons Vicksburg, Miss., plant has 22,000 b/d of naphthenic capacity.

In addition to a 7,800 barrels per day naphthenic plant in Nynashamn, Sweden, Nynas has long-term marketing agreements to sell naphthenic base oils produced at a PdVSA plant in Emmastad, Netherlands Antilles, and a Valero plant in Three Rivers, Texas. Naphthenic capacity at those facilities is 3,700 b/d and 2,400 b/d, respectively.

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