Russian PAO Output to Restart by 2016


Tatneft and Nizhnekamskneftekhim expressed readiness to resume polyalphaolefin and finished oil production at their joint ventures idled plant in Nizhnekamsk, Tatneft told Lube Report.

However, it is still not clear when exactly the production will restart due to some unsettled financial obligations between the partners. There are ongoing procedures for settlement of the [plants] debts and subsequent resumption of PAO and finished oil production, Gabbas Ilyasov, the companys deputy director for development told Lube Report on Monday. More details on the production timeline will be available by the end of this month.

The 10,000 tons per year PAO plant, the only one in Russia, is owned by Tatneft-Nizhnekamskneftekhim-Oil, a 74-26 joint venture between Tatarstans oil major and chemicals company Nizhnekamskneftekhim. It includes a blending plant where the company produced semi-synthetic and synthetic motor oils and other synthetics such as vacuum and compressor oils.

Due to the lack of linear alpha olefin feedstock supplied by the nearby Nizhnekamskneftekhims chemical complex, the PAO plant halted its operation in 2010. Two years later, after it spent its backlog feed and accumulated debts due to its parent companies, it halted finished lube production as well. What we are looking at now is 2014 at the earliest or 2016 at the latest when the creditors [Tatneft and Nizhnekamslkneftekhim] would start to pay off the plants debt, a Nizhenkamskneftekhim official told Lube Report.

The $49 million plant started operating in December 2003. The supply problems started in 2005, when the parent company increased feedstock prices. The plant accumulated debts and experienced losses because the non-competitive prices of its finished products ultimately led to a production halt. In addition, the hired engineering company made plant construction design mistakes, and Tatneft had to invest more than 75 million rubles [U.S.$2.1 million] to fix these mistakes, the official said.

In 2013 the plant was put on tender twice. Tatnefts Nizhnekamsk refining complex Taneco expressed intention to buy it but the bidding was unsuccessful because of the lack of competing bidders. The starting bid was set at 870 million rubles ($24.6 million).

After both parent companies realized that the PAO plant could become profitable as the demand for high quality base stocks increased in Russia over the last couple of years, they decided to revamp it and restart the production process.

The production expansion could cost an additional 450 million rubles in investments, Ilysov said. Besides the synthetic products based on PAOs, we are planning to use Tanecos API Group III base oil to produce high quality automotive and industrial lubricants, Ilyasov said.

The Taneco refinerys combined hydrocracking unit started to stream earlier this year. Its base oil plant is set to commence production of 90,000 t/y of Group II and 100,000 t/y of Group III base oil at the beginning of 2015.

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