Baton Rouge Upgrade Has Buyers Buzzing


ExxonMobil is apparently preparing to upgrade to Group II the automatic transmission fluid base produced at its Baton Rouge, La., refinery. And that has customers wondering what will happen to the rest of the plants output.

Market sources say ExxonMobil informed them recently that Baton Rouge will stop producing 1391 ATF base, a Group I stock, by early in the second quarter of 2004, andit will be replaced by a Group II ATF base, EHC 30. But the company has remained tight-lipped, these sources say, about whether the upgrade will affect the plants other product streams.

Of course, the fact that they can go to Group II for 1391 raises the question of whether they will do it for other cuts, or even the entire plant, one buyer said, on condition of anonymity. As you can imagine, this has a lot of people wondering whats going to happen.

ExxonMobil spokesman J. Donald Turk declined to discuss plans for Baton Rouge, saying only, We plan to meet the next generation of automatic transmission fluids. He did not say whether the statement referred generally to the trend toward higher ATF standards or to an upgrade of General Motors Dexron III specification that goes into effect next month. On July 1, the company plans to stop issuing Dexron III G licenses for service fill ATFs, requiringnew licenseesto meet the more stringent Dexron III H specification. Current Dexron III G licensees will have one year to convert to the new standard, too.

General Motors predicted the change would force blenders to use Group II and Group II-plus base stocks, already required for its own factory fill purchases. The change is a significant event for the ATF market because 61 percent of the fluid sold in the United States is licensed as Dexron or Mercon.

As one would expect, EHC 30 will cost more than 1391, customers said. Because Baton Rouge is the only source for the stock, customers will have to decide whether to use the new product or to switch to another supplier. One customer said an additive company has claimed it can make a Dexron III H fluid still using a Group I base. On the other hand, upgrades of transmission fluid standards appear to be a well-established trend.

While automatic transmission fluid blenders ponder the implications for that business, its a safe bet that interest about the rest of Baton Rouges output is even higher. The plant is the fourth-largest in North America, with capacity to produce 16,000 barrels per day. ExxonMobil does not release production totals for its various base oil cuts, but observers say 1391 certainly accounts for only a small portion of Baton Rouges total.

ExxonMobil dominates the North American base oil market, operating three Gulf Coast refineries and two in Canada. (The Canadian plants are owned by Imperial Oil Ltd., of which ExxonMobil is controlling shareholder.) Those plants have combined capacity of 57,300 barrels per day, or 26 percent of the continents total. But just a quarter of the companys capacity is Group II or Group III, which now account for 41 percent of North American paraffinic capacity.

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