Motiva declared force majeure yesterday on base oils produced at its plant in Port Arthur, Texas, indicating that deliveries of all grades will be disrupted due to damage from Hurricane Harvey.
In a letter to customers, a copy of which Lube Report obtained, the company advised that the 40,300 barrel per day plant and associated logistics systems were directly affected by the storm. The company implied that it plans to implement allocations but did not discuss how steep they will be or provide information about how long the disruption is likely to last.
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That left customers – and others – anxious for more information about the status of the plant, which is by far the largest source of base stocks in the Western Hemisphere.
Until the situation is defined by them, we dont really know how big of a problem this is, said one customer, who spoke on condition of anonymity. We expect to be without our normal supply for some period of time. If the gap is large and lasts for months, that would be a very big impact. If the allocations are small and the situation is resolved this month, it could be minimal.
The industry received better news last week when Lubrizol said its lubricant additive plant in Deer Park, Texas, had resumed production and was scheduled to return to full operation by Sept. 9. The facility is Lubrizols largest North American source of lubricant additive packages. It halted operations Aug. 30 because of flooding and sustained minor damage.
The U.S. Gulf of Mexico Coast is home to numerous facilities that produce base stocks and additives, which account for all of the raw materials used to manufacture lubricants. Harvey and the record flooding that it caused disrupted operations at four oil refineries that include base oil plants and numerous chemical plants producing lubricant additives or building blocks used to make them.
The other refiners, including ExxonMobil – which operates the continents second-largest base oil plant at its Baytown, Texas, refinery – have said their refineries are returning to normal operation but refused to comment on the status of base oil plants. Lube blenders said rail deliveries of base oils from Baytown have been halted because of disruption to rail service.
The Baytown plant has capacity to make 28,000 b/d of Group I and II stocks.
Force majeure is a condition permitting suppliers to depart from strict terms of contracts because of events that could not be reasonably foreseen or controlled. Companies that declare force majeure often implement allocations that limit contracted customers to receiving specified portions of normal deliveries until disruptions end and supply chains are restocked. As sources noted yesterday, the amounts that customers receive under allocations can vary from 100 percent of normal levels to the low double-digit percentages or less. It is also possible that Motiva would set different levels of allocation for the different grades of base oil produced at Port Arthur.
This is the big daddy of U.S. base oil plants, said a second customer, who also spoke on condition of anonymity. You can bet everyone is going to be waiting to hear whats going on there.