In its mid-November 2014 quarterly earnings statement, the road paving company detailed preliminary plans. At the end of October 2014, the executive management of Societe de la Raffinerie de Dunkerque (SRD), a 100 percent wholly-owned Colas company, provided notification to the works council at SRD regarding an employment preservation plan relating to job losses associated with the closure of base oil production units, Colas stated in its news release.

The company said in the news release that it held an information meeting Nov. 6, to be followed by a negotiation phase. These measures aim to refocus SRDs business solely on bitumen production, in order to recover economic equilibrium in due course and ensure sustainability for the production site in Dunkirk, Colas stated.

Stephen B. Ames of SBA Consulting, Pepper Pike, Ohio, said that for Colas to continue bitumen production at the plant after closure of the base oil operations is relatively simple. They shut all of the base oil units – solvent extraction, solvent dewaxing and hydrofinishing – other than the propane deasphalting plant, he explained. At the same time, they switch from atmospheric residue to vacuum residue as plant feed. Other than the bitumen product, the only by-product is the deasphalted oil that can be disposed of in the merchant market as heavy vacuum gas oil.

Colas Group closed on its acquisition of the French bitumen and base oil plant in mid-2010. The Dunkerque plant had been a joint venture between ExxonMobil, Total and BP, which owned stakes of 50 percent, 40 percent and 10 percent, respectively. At the time of the sale, BP sold its shares to ExxonMobil to prepare for the plants acquisition by Colas. An industry source told Lube Report that the majors are generally no longer taking base oils from Dunkerque.

Ames pointed out the purchase of SRD was driven principally by the approximately 300,000 t/y bitumen production capacity at the plant. The base oils, extracts and waxes held little interest to Colas, Ames told Lube Report.

Amy Claxton, principal of consultancy My Energy in Hummelstown, Pa., noted that that key reason for Colas Groups acquisition of the Dunkerque refinery in 2010 was to have more bitumen/asphaltic material to support its road building infrastructure. At the time of the acquisition, Colas said the location would supply 25 percent of the bitumen for their operations in France. Colas is a global producer of construction materials for construction and maintenance of road, air, rail and maritime transport infrastructure. She said its primary products are asphalt mixes and aggregates, ready-mix concrete, liquid asphalt and polymer modified binders and emulsions for road construction.

I expected Colas to exit Group I stocks in July of 2013 because they had a three-year agreement with ExxonMobil to provide technical support from the date of acquisition, Claxton told Lube Report. In addition, Colas had an offtake agreement whereby Total bought 40 percent of their base oil for the first two years of operation.

She explained that the Colas facility is a small specialty plant, not a refinery. She noted they bring in reduced crude – atmospheric distillation bottoms, also called atmospheric residuum – from another refinery as feedstock to produce Group I base oils, which is much more costly than operating a base oil plant that is part of a large refinery.

Thus their Group I economics were not as robust as a fully integrated Group I plant in a large refinery, Claxton said. Also, Dunkerque, while it was owned by ExxonMobil/Total/BP began a small Group III production operation by purchasing fuels hydrocracker bottoms from a third-party refinery as feedstock to produce Group III base oils – again, a very high-cost operation relative to their competition, who produce Group III base oils as part of a large, integrated refinery operation. For all of these reasons, it comes as no surprise that Colas is working to streamline their specialty plant operation to focus on asphalt, not base oils.