The giant expansion of Motivas Port Arthur, Texas, base oil plant came online last week, bringing a whopping 15,000 barrels per day of new capacity to a thirsty market.
The project makes Port Arthur by far the largest base oil plant in the world. Observers said it will help the market in coming months – if not immediately – as it strives to recover from an unprecedented series of disruptions.
Lord knows the industry needs it – not only the United States but all around the globe, said Stephen Ames, principal of SBA Consulting, of Pepperpike, Ohio. The market will welcome any additional juice right now, and this is a very significant volume.
Motiva, a joint venture between Shell Oil and Saudi Refining Inc., has not formally announced the opening and declined to comment on it this week. According to market sources, however, the expansion – the plants third production train – was operating at approximately 60 percent of capacity last week, producing oils that met specification and which the company was selling. Startup was originally scheduled for Feb. 1 but was postponed several times. The company blamed the delays on unexpected conflicts with a maintenance shutdown in another part of the refinery.
The expansion byitself would qualify as a large base oil operation, and it brings a whole new scale to the overall plant at Port Arthur, which was already the worlds largest. At 40,000 b/d, it is 39 percent bigger than the second-largest plant, S-Oils 24,500-b/d facility in Onsan, South Korea.
Motiva officials say the 15,000 b/d figure for the new train is conservative, andit will probably undergo incremental increases in the next few years.
The expansion is anxiously awaited by lubricant blenders struggling to obtain base oils in the wake of supply disruptions. Problems began with Hurricane Rita, which temporarily closed four plants in September. The situation worsened when fires closed half of Petro-Canadas plant in Mississauga, Ontario, and all of the Excel Paralubes plant in Westlake, La.
Four of the continents major suppliers of Group II base oil, including Motiva, are operating under sales allocations. Observers say shortages have been compounded by rising lubricant demand. In addition, a diesel engine oil upgrade scheduled to take effect later this year, API CJ-4, is expected to increase demand for highly refined base stocks.
Motiva and others in the market caution that the expansions impact wont be felt immediately. One of Motivas existing trains is scheduled to close for maintenance in June, and the company will have to build inventories to maintain deliveries during that shutdown. But the expansion will lessen the blow that would otherwise have been felt from that shutdown, and buyers and sellers agree it will hasten the rebuilding of the supply chain, which is expected to last most of this year.
Beyond that time frame, some suggest the expansion will push Group II supplies into surplus.
In the short term, Motivas expansion has the potential to ease some of the supply tightness in North America caused by a variety of factors, said Milind Phadke, project manager in Kline and Co.s Petroleum Products Practice. In the long term, however, it will result in significant surplus of Group II in North America.
Observers said the project will relieve only parts of the base oil market – specifically those such as passenger car andheavy-dutyengine oils, which depend largely on light- and medium-viscosity grades of highly refined stocks.
This is certainly good news for most automotive and commercial applications, but it has very little impact on heavy neutrals and virtually none for bright stock, said an official at one lubricant blending company, who spoke on condition that he not be identified. Industrial and marine applications will continue to be under pressure as heavy neutral and bright stock capacities lag against growing supply of light and medium neutrals.
Motiva has said it remains committed to the North American market, but observers predict the expansions impact will be felt in Europe, too.
We expect that Motiva will continue to look at export markets, as they have in previous time periods when Group II was long, said William R. Downey, vice president of Klines Petroleum Practice. If Group II can be successfully inserted in the changing European formulation schemes, the realizations on these export sales might be similar to North American sales. We think that this is the rationale behind Shells recent announcement that they would offer Motiva Group II in Europe.