Chevron: We’re #1 in Premium Base Oil


PASCAGOULA, Miss. – Advancing motor oil specifications and quality standards made now the right time for Chevron to launch its 25,000 barrels per day API Group II base oil plant here, Chevron Lubricants president said at a commissioning event Aug. 21.

Key Chevron leaders and Mississippi government officials, including Miss. Gov. Phil Bryant, spoke at a breakfast reception Aug. 21 at the Hilton Garden Inn in Pascagoula, part of the commissioning event. The plant began shipping base oil in July.

Advancing specifications and quality standards are driving demand growth for lubricants containing premium base oils, much faster than the overall market, Chevron Lubricants President Colleen Cervantes told the reception. These increased engine demands require lower viscosity lubricants and are formulated with the latest additive technology. In fact, industry estimates predict the compounded growth rate of roughly 10 percent a year will take premium base oils from approximately 30 percent of the global market today to more than half of the market by 2020. The shift is already under way.

She said stringent emission standards are already established in Europe, which will be a major export market for the Pascagoula plants base oil. The rest of the world is also pushing towards increasingly stringent standards, Cervantes added.

As another example of changing standards, she cited heavy duty motor oil in the North American market. Over the next 10 years, the North American on-road heavy duty motor oil market will shift dramatically from primarily a 15W-40 market to lower viscosity grades, she said. We estimate that this trend will shift roughly 180 million gallons of annual demand to multiple viscosity grade motor oils. This irreversible trend is being driven by a combination of government regulations, for improved fuel economy and lower carbon emissions, and to address truck owners laser focus on improving their bottom line through lowering their operating costs. Seven of the 10 largest fleets in North America have already moved to lower viscosity heavy duty motor oil.

Chevron is also preparing for the next category of heavy duty motor oil, PC-11, which is currently expected to reach the market by early 2017. It will continue to emphasize the focus on lower viscosity engine oils for the on road truck business, Cervantes said. These engine oils will only be possible with premium base oil formulations. Chevron is extremely well positioned to capture this demand over the next decade.

Cervantes said that the Pascagoula plants capacity, combined with that of Chevrons Richmond, Calif. plant, gives it about 2 million gallons per day in U.S. base oil production.

When you add in our production from our J.V. GS Caltex in South Korea, Chevron has officially become the worlds largest producer of premium base oils, she said.

She noted that customers rely on the company for a reliable supply chain. For true global reach, she said, Chevron has supported the companys entire base oil network with 13 global supply hubs, many established in the last two years in anticipation of the Pascagoula plants production. We have them strategically positioned to serve the worlds demand, she said, noting the company will be delivering premium base oils produced from its three manufacturing locations that are interchangeable, creating a global slate with flexibility to deliver base oil for its own use and customer use in every region.

Cervantes said that while a true global base oil slate is important to Chevrons customers, its also of value to the entire industry. Engine manufacturers and additive suppliers have manufacturing plants located around the world – they want to be able to use the same base oil in those sites. The missing ingredient has been a high quality base oil supply thats available around the world.

She noted that for Chevron Lubricants and the companys entire downstream and chemicals organization, the Pascagoula plant represents a giant step forward in their long term growth strategy. In this strategy, lubricants and chemicals will serve as growth engines within our portfolio, she said. Long before the groundbreaking in Pascagoula, we set a course for creating a fully integrated business that will leverage our unique strengths and long history of leading edge base oil, finished lubricants and additive technology. Chevron is the only company with wholly owned and operated additive, base oil and finished lubricant businesses. We believe the integrated value created by these businesses is critical to our competitive leadership and to our differentiation.

Joe Robison, Pascagoula refinery operations manager, said Chevron first began considering the investments necessary for a base oil plant in the mid 2000s. Public hearings began in 2009, and the company made its investment decision on the $1.4 billion base oil plant project in 2011.

The mechanical completion was in April of this year, Robison recalled. We actually began startup of the primary units involved in that in June. And we actually made and shipped our first base oil product in July. Its been a wonderful startup for us – very safe, very smooth. Were excited to see the actual finished product that these years of investment have brought us to.

Robison said Chevron credited support from a wide variety of elected officials, trade industries, state organizations and county groups such as the Jackson County Board of Supervisors and Economic Development Board with helping the project reach fruition.

Chevrons investment in the Pascagoula base oil plant created 2,000 incremental jobs during its construction, he noted. It has created 50 full time additional jobs in the refinery today that will go on forever, he said. We spent nearly $200 million in Jackson County on local supplies and services with the many suppliers and people providing that.

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