Shell Petroleum Co. Ltd. and Hyundai Oilbank yesterday confirmed plans for a new 650,000 metric tons per year API Group II base oil plant in Daesan, South Korea, to be fully operational in the second half of 2014.
Hyundai Oilbank announced the project in February 2012. A joint venture between the two companies – Hyundai and Shell Base Oil Co., Ltd. – will manage commissioning, start-up and operation of the plant. Hyundai Oilbank has a 60 percent share and Shell a 40 percent share in the joint venture.
A formal ground breaking ceremony will take place at the refinery Jan. 22.
Daesan is along the western side of the Korean peninsula in South Chungcheong Province, southwest of Seoul. Shell noted that Daesan is close to key lubricants markets and has strong infrastructure. This plant is being built in response to an expected growth in high quality lubricant demand in the East, driven by new vehicle ownership and production, construction and industrial activity – especially in the power generation and oil and gas production sectors, Shell said in yesterdays statement.
Commercial agreements have been put in place with Shell using a majority of the base oil from the future plant in its businesses, with the balance being made available for third parties, a Shells spokesperson told Lube Report.
An industry source expressed doubt that Shell would sell much if any of the Daesan plants base oil to third parties, noting that Shell is short of equity Group II production, especially in Asia. The new plant will help balance Shells raw material requirements, this source pointed out to Lube Report, with the base oil most likely ending up in Shell blending plants in China and a new facility being built in Indonesia.
According to Shell, the Asia Pacific region is driving global growth in lubricants demand, and its estimated that by 2020, the region will represent more than 50 percent of all demand.
The joint venture plant will be Shells ninth base oil plant globally. Three of Shells current base oil manufacturing plants are in Asia – Pulau Bukom in Singapore, Kaosiung in Taiwan and Yokkaichi in Japan. Hyundai Oilbank hasnt previously been involved in the base oil business.
Shell has a global network of 50 lubricant blending plants, including 19 in Asia. It has announced plans to build two new lubricant blending plants, one in China and another in Indonesia.
Based in Seoul, Hyundai Oilbank also has offices in Singapore. The company is an affiliate of Hyundai Heavy Industries.