The facilities are located at ST Services terminal on the Savannah River. Base oil storage, previously used by another tenant, is already in place. ST is assembling two segregated blending lines – one of which will remain zinc-free – which are scheduled to open in June. Chemlube has signed a long-term lease for these facilities, which will have storage capacity of 3 million gallons.

Founded in 1989, Chemlube distributes petrochemicals, base oils and lubricants in Asia, Europe, Africa and the Americas. Much of its business originally focused on the former Soviet Union, and it still operates lube blending plants in Pavlodar, Kazakhstan, and Kiev, Ukraine.

The people at Chemlube know well that base oil prices in the United States are higher than in other regions of the world. In recent months, for example, export prices from Europe were more than $100 per ton lower than posted prices in the United States. Although this represented a wider spread than normal, Chemlube officials contend that arbitrage will remain economical in the long run.

The United States isnt exactly undersupplied, Vice President Vincent Gillooley said. But supply is relatively tight here, compared to Europe and the rest of the world. And on average, European base oils are better in terms of volatility and other characteristics. We think there will be demand for them.

Chemlube plans to import base oils primarily from Western Europe. But officials recognize that there is more to the business than simply getting the fluid across the ocean. Because their products are not used regularly in the United States, European refiners have not undergone testing needed to have their stocks certified for this market. Chemlube is seeking approvals itself, starting with industrial applications, which generally have less rigorous testing requirementsthan motor oils.

Then there is the challenge of penetrating a market. The Savannah project includes blending facilities so that Chemlube can produce its own lubes while waiting for other blenders to accept the base stocks it imports.

Well be set up to become our own base oil customer, Gillooley said.

The Savannah facilities have rail, truck and barge access, as well as deepwater tanker docking capability. With the savings from European imports, Gillooley expects to be able to provide low-cost Group I base stocks and lubricants to most areas east of the Mississippi River, except maybe for New England. Chemlube is bullish enough about its prospects that it has made provisions for expansion.

We think theres still a good amount of base oil demand to go around, Gillooley said. And with all of the consolidation thats gone on in the industry, we see some large, less flexible producers who dont want to bother with some business thats too small for them, but still represents an opportunity for a smaller company like ours.