U.S. Base Oil Output Ticks Up


Base oil production in the United States climbed 2.3 percent in 2004, according to newly released data from the Department of Energys Energy Information Administration.

The increase was mostly on the paraffinic side of the market and occurred despite increased feedstock competition for fuels refining. Observers speculated that last years total may have risen due to higher production at Group II plants and because refiners had fewer operational problems than the year before.

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There probably was weaker production from Group I plants last year, said one marketer, who spoke on condition of anonymity. But I think we had some pretty good capacity creep at Group II plants that more than made up for it.

U.S. refiners produced 62 million barrels (434 million metric tons) of base oil last year, up from 60.6 million barrels in 2003. Paraffinic production rose 2.6 percent to 52.2 million barrels, while naphthenic production was nudged 1 percent to 9.8 million barrels.

2003 output was pinched somewhat by an unusually high number of plant disruptions – some scheduled for maintenance work but others unplanned and caused by weather or accidents. In 2002, suppliers made 63.3 million barrels of oil.

There were fewer disruptions last year, but 2004 had a different drag on production: Unusually healthy fuels margins led some refiners to shift feedstock from base oils to fuels output.

Motiva confirmed that yields at its Port Arthur, Texas, plant increased due to a change in catalyst. The company refused to quantify the increase, but observers have speculated the gain may have been in the neighborhood of 1.4 million barrels.

Another marketer, who also spoke on condition of anonymity, pointed out that the market lost more than 14,200 barrels per day of capacity due to Shells closure of two base oil plants in 2003 – one in March, the other in September.

Im surprised that production went up last year after Shell closed its plants, he said. But if the plants that were left were running pretty hard, and if there was a good-sized increase in Motivas output, maybe that was enough to offset the closures and to generate a bit of an increase.

Even after last years increase, U.S. base oil production is still below the peak reached in 1999, when refiners churned out 67.4 million barrels.

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