LONDON — Last year may not have seen any mega-deals, but the trend toward consolidation of the global base oil industry continued. In addition, 4 million tons per year of new base oil capacity was announced, while plant closures and disposals removed about 1.1 million tons per year of capacity, an industry expert said.

Stephen Ames, principal of SBA Consulting of Pepper Pike, Ohio, provided a retrospective of 2004 at the ICIS-LOR World Base Oils Conference here on Feb. 17.

• Poland’s PKN Orlen purchased the Czech governments 63 percent stake in Unipetrol, including the small Paramo base oil plant. PKN has certainly become a significant force in Central Europe, Ames noted.
• Not to be outdone, Ames continued, Austria’s OMV, another major player in the Central European market, paid 1.5 billion for the Romanian governments 51 percent stake in Petrom.
• The planned Tatneft/Zorlu$1.3 billion purchase of the Turkish governments 66 percent stake in refiner Tupras was voided by a Turkish court. Whether Tupras will still be fully privatized is now anyones guess, said Ames.
• ConocoPhillips spent $3 billion to acquire a 10 percent stake in Russias largest base oil manufacturer and exporter, LukOil, and plans to double its holding.
• Malaysia’s Petronas and South Africa’s Sasol agreed to a joint venture in South Africa; the new company, Uhambo Oil, is nowthat countrys largest petroleum marketer.
• Chevron and Sasol extended theirgas-to-liquids joint venture from Nigeria to Qatar, where they are considering base oil production.
• Marathon Petroleum agreed to buy out Ashlands 38 percent share of the Marathon Ashland Petroleum downstream joint venture, including the Catlettsburg base oil refinery, but the deal has been delayed by an unfavorable tax ruling.
• And on the packaging side, Graham Packaging acquired Owens-Illinois plastic container business for $1.2 billion and now has 88 blowmolding plants worldwide.

New base oil capacity announcements demanded significant attention over the past year, said Ames. These included:

• SK provided an additional 350,000 tons per year of Group III capacity last June when it brought its second base oil refinery on-stream in Ulsan, Korea.
• Fortum announced a 30,000 tons per year Group III expansion at Porvoo, Finland, due on-stream in the third quarter of this year.
• U.S. naphthenic refiners San Joaquin, Valero and Ergon completed expansions of 100,000, 60,000 and 60,000 tons per year respectively.
• Sinopec upgraded its 400,000 tons per year Shanghai Gaoqiao base oil refinery from Group I to Group II/III, and announced similar plans for its Maoming plant in 2006.
• Never to do anything on a small scale, said Ames, ExxonMobil announced a massive 1.5 million tons per year base oil plant as part of an even more massive GTL project with Qatar Petroleum.
• ExxonMobil also announced plans to upgrade PAO quality in Beaumont, Texas to a level the company calls Group IV-Plus.
• Petronas is exploring building a 300,000 to 400,000 tons per year Group III plant in Malaysia.
• Motiva increased output at its Group II refinery in Port Arthur, Texas, purportedly from a change to a more active catalyst, said Ames. Some observers say the increase was on the order of 200,000 tons per year. That must be some catalyst!
• Motiva also announced a third train at Port Arthur, increasing production by about 700,000 tons per year, due in early 2006. This would bring Motivas capacity to 2 million tons per year, by far the worlds largest base oil plant, with all output of Group II and II-Plus quality.
• The Oil Re-refining Co. opened the first new rerefining operation in the United States in many years, in Portland, Oregon, with capacity of 25,000 tons per year. Another plant in Reno, Nevada, is planned.
• Calumet plans to expand Group II capacity by 100,000 tons per year at its Shreveport, Louisiana, refinery.
• Formosa Petrochemical will build a 500,000 tons per year base oil plant in Taiwan by 2007.
• Chinese Petroleum, also called CPC, will build a 250,000 tons per year Group II/III plant in Taiwan, to open in 2008.

• Shell closed its 140,000 tons per year Geelong base oil refinery in Australia last year.
• Shell also announced the coming closure of the 260,000 tons per year Grasbrok, Germany, plant – Shells fifth base oil refinery closure over the past three years.
• BP sold its 230,000 tons per year Neuhof, Germany, base oil refinery to H&R Wasag.
• BP also announced closure of its 350,000 tons per year Coryton, U.K., base oil refinery at the end of this year. This will leave the worlds third largest lubricants company without any wholly owned base oil capacity, noted Ames.
• Romanias Astra closed the Ploiesti refinery, including its 300,000 tons per year base oil plant.
• And on the additives side, Oronite will close a facility in Brazil, and Lubrizol will close a plant in England.

Excluding the additive closures, announced capacity reductions total 1.1 million tons per year, just a quarter of the 4 million tons of announced new capacity, Ames said.

Last year was not a prosperous year for most base oil refiners, Ames concluded. The steep rise in crude prices sharply depressed margins for much of the year.

In the past, base oil refining was pretty much a stand-alone activity, with its own supply/demand dynamics, Ames said. That has changed, with the base oil refining business impacted by the tight crude market, record refinery operating rates and clean fuels investment decisions. And freight markets continued to add to the turmoil with tight capacity, and higher rates limiting trans-regional sales and sourcing opportunities.