Calumet Specialty Products Partners L.P. said it will partner with BP Lubricants USA to begin blending Castrol motor oil in its newly expanded blending and packaging facility in Shreveport, Louisiana.
In a news release Monday, Calumet said it greenlit the capital improvement project to expand the Shreveport facility, which was needed to support the growth of its branded and packaging business. The facility is a 15-acre space where the company manufactures, blends and packages specialty lubricants, fuels and solvents. It operates what the company claims is one of the few very highly automated explosion-proof fillers in use. When Calumet acquired the facility in 2012, it was an 85,000 square foot production and warehouse facility with bulk tank storage capacity of approximately 1.5 million gallons.
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The Shreveport facility now has 400,000 square feet in additional storage, dual loading/unloading racks, as well as a dedicated rail spur and railway access. On-site tanks can accommodate large quantities of fluids and all tanks feature the latest automated technology from position vales to inventory monitoring, with dedicated source and destination, to ensure fluids are not co-mingled.
We are confident in the capabilities of the Shreveport facility team and are excited at the potential opportunities stemming from this partnership with BP Lubricants, said Harji Gill, Calumets vice president of branded product sales.
Stephen Ogden, regional procurement manager for Castrol, said the additional capacity provided by Calumets Shreveport facility complements Castrols existing U.S. manufacturing operations, which includes its plant in nearby Baton Rouge. It gives us additional flexibility to support both our existing business and our future growth aspirations, Ogden told Lube Report. Production from Shreveport will support our business in the U.S. as well as our markets in Latin America.
He said Calumets Shreveport facility will complement Castros existing U.S. manufacturing base, producing a number of products and packaging types.
Indianapolis-based Calumet discussed the tolling agreement in general terms during its third quarter earnings conference call and presentation on Nov. 3. During the call, Calumet said it had reached a new tolling agreement with a global, integrated oil and gas company to blend and package 10 million to 15 million gallons per year lubricants at Calumets facilities, with startup targeted for the fourth quarter this year.
During that conference call, Calumet CEO Timothy Go said the new relationship serves a number of important purposes. First, it increases our volumes at least 30 percent in our Shreveport packaging facility, Go said. Second, it develops a platform for us to expand our relationship across multiple opportunities, which could have numerous benefits to both parties in the future. We look forward to growing with this new partner in the future and will be starting this program during the pending fourth quarter.
Jason Carnovale, analyst with Cleveland-based industry market research firm Freedonia Group, said the agreement between BP and Calumet is an interesting development in the lubricants market.
Calumet has been one of the more intriguing participants in the industry in the last several years, having gradually diversified into finished lubes and synthetics – not to mention oilfield services, Carnovale told Lube Report. This strategy has been fairly successful for Calumet, as base oils and finished lubes continue to provide steady volumes and higher margins than most other refinery products. Expansion of the companys blending and packaging capabilities should help leverage vertical integration and further this trend.
He noted the agreement with BP will give Calumet a reliable revenue stream and ensure capacity at the newly expanded facility is utilized. From BPs perspective, this will be a significant relationship, Carnovale said. BP uses third-party blenders and distributors to supplement its in-house capabilities, especially internationally. Having products blended and packaged at Calumets large, high-tech facility will simplify BPs supply chain management and provide a strong relationship with a U.S.-based partner.
Calumet acquired a number of lubricant distributors and blenders over the last several years.
In 2014, the company acquired Gilbert, Arizona-based United Petroleum Co., a wholesale distributor of motor oils, coolants and greases.
In late 2013, Calumet acquired Bel-Ray Co., a New Jersey-based manufacturer and distributor of lubricants sold through its industrial, mining and powersports divisions.
Calumets acquisitions in 2012 included Porter, Texas-based commercial and industrial lubricants producer Royal Purple; blender and distributor TruSouth Oil of Shreveport; and the Hercules synthetic aviation and refrigerant lubricants business in St. Louis, Missouri.