Lukoil plans to permanently shut down its API Group I base oil plant in Nizhny Novgorod early next month, a source close to Lukoil activities told Lube Report.
According to my knowledge, the company is now making all necessary preparations to shut down the capacity by April 1, said the individual, who spoke on condition of anonymity because Lukoil has not officially announced the closing. The plant will be reconfigured to produce light petrochemical products.
When used by oil refining specialists in Russia, light petrochemical products usually refers to fuels such as gasoline, diesel or kerosene.
The Nizhny Novgorod facility is one of three base oil plants operated by Lukoil – by far the largest base stock producer in Russia. The Nizhny Novgorod plant has capacity to make 230,000 metric tons of oil per year. Lukoil also operates plants in Volgograd and Perm with capacities of 550,000 t/y and 480,000 t/y, respectively.
Numerous Group I plants have closed the past two decades in Europe and North America due because of base stock demand in the lubricant industry shifting to Group II and III oils. Russia has seen fewer closures, but a number of plants in former Soviet Republics have significantly reduced capacity.
Several Russian refiners, including Lukoil, have also delayed announced plans to install capacity to make Group II and III oils. At one point Lukoil said it would add Group II and III capacity at two of its plants, but in April 2014 an official said the company would not proceed with those plans.
Given the sharp drop of the crude oil prices since the summer of 2014 (followed by a substantial drop of base oil prices) and the worsening economic climate in the country, some industry observers expected Russian oil majors to start rationalizing Group I plants. Lukoils and Rosnefts Nizhny Novgorod and Novokuibyshevsk refineries are planning to close their old installations that use conventional processes of dewaxing and solvent extraction, Vladimir Kapustin, head of Moscow-based research and design institute VNIPIneft, told WRAs CIS Downstream Week conference held in Berlin in December.
Located in the city of Kstovo, Nizhny Novgorod oblast, Lukoils base oil plant there is the companys smallest Group I base oil capacity at the moment. It operates two more Group I capacities, the 480,000 t/y plant in Perm and the 520,000 t/y plant in Volgograd. At its Volgograd site, Lukoil also has 30,000 t/y Group III production capacity.
Lukoil is among the top ten global lubricant producers. In 2014 the company produced 1.2 million tons of base oils and lubricants and held around 40 percent share of Russias lubricant market.