Weve been working towards stopping base oil production at Stanlow for some time as part of its push to increase margins and profitability, the spokesman told Lube Report.

One issue with the base oil is that the European/United Kingdom market is oversupplied, and margins are very low, the company official noted. To produce base oil requires very specific, light, higher cost crudes, the spokesman said, explaining that currently base oil represents only two percent of the refinerys output but dictates choice of crudes for around 25 percent of total crude intake at Stanlow.

By stopping production of this very minority product, we will be able to significantly further widen our choice of crudes and opt for some other lower cost varieties which will improve our margins, the spokesman said. Over the past year or so weve already introduced at least 11 new opportunity crudes at Stanlow from various geographies, for example Africa and Canada, which have lowered our crude costs. The new crudes contributed about $1 per barrel of additional margin.

Essar is also planning to reconfigure some of Stanlows base oil production train units so their output is instead used to feed the residue catalytic cracking unit. This will be much more efficient, the spokesman said. It wont mean a reduction in overall processing capacity.

According to the spokesman, Essar expects that discontinuing base oil production, coupled with a switch from fuel oil to natural gas at the refinery to fuel six boilers on the site, will give the company another $1per barrel of margin by the beginning of the 2013-2014 financial year. Together with additional projects, the company expects the Stanlow refinerys margin to be $3 per barrel higher in February 2014 than when it acquired the refinery in August 2011.