MOSCOW – LukOils lubricant business knows it will need greater volumes of highly refined base oils. But with Group I oils in healthy demand and Group II stocks bringing little or no premium, the Russian company is in no hurry to make the prerequisite investment.
LLK-International General Director Maxim Donde discussed the companys position during a Nov. 22 press conference at the Lubricant Russia conference here. In response to a reporters question about upgrading its base oil capacity, Donde cited a previously announced plan to upgrade its plant in Perm, Russia. Donde noted that the company intends to have the facility, located on the eastern edge of the Ural Mountains, begin making Group II oils by 2015.
Given the market conditions today, there is no economic rationale for upgrading our refineries right away, Donde said, alluding to the fact that U.S. posted prices for Group II base oils have sunk below postings for corresponding Group I stocks. Our Group I base oils are in high demand. So to suggest that we need to invest $100 million to make something that has the same price does not make much sense.
LLK has not yet announced details of the upgrade, such as the amount of Group II capacity it would bring to Perm. That facility, one of three LukOil base oil plants, has capacity to make 9,400 barrels per day of Group I.
LukOil is by far the largest base oil producer in Russia, with total capacity of 28,960 b/d. A plant in Volgograd can make 500 b/d of Group III, but the rest of the capacity is all Group I.
Posted paraffinic base oil prices are unchanged in the United States this week. Crude closed at $62.53 per barrel yesterday on the New York Mercantile Exchange, according to Bloomberg. That was$1.57 above the price a week ago.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.