Motiva Allocations Strain Supply Shortage


Perhaps unrealistically, some lubricant blenders have looked to the looming expansion of Motivas Port Arthur, Texas, base oil plant as a partial solution to the supply disruptions gripping the U.S. market.

Instead, the company on Friday became part of the problem as it joined the list of producers that have imposed sales allocations. Motiva attributed its action to maintenance work in another part of the Port Arthur refinery complex, which apparently has contributed to the delay in starting its new production train.

This step that Motiva has taken definitely exacerbates the situation, said one base oil buyer, who spoke on condition that he not be identified. Its getting pretty serious – I think certainly to the point where some companies are unable to find base oil that they need.

In the past five months, the U.S. base oil market has been battered by an unprecedented string of disruptions, beginning with Hurricance Rita, which closed four plants in Louisiana and Texas. Those plants resumed operations – three of them in October – but the loss of production time drained inventory levels throughout the industry.

Several subsequent developments caused the situation to worsen. Half of Petro-Canadas Group II plant in Mississauga, Ontario, was knocked offline by a Jan. 7 fire, forcing the company to impose allocations. Then a Feb. 1 fire completely closed the Excel Paralubes Group II plant in Westlake, La., triggering force majeure declarations by co-owners ConocoPhillips and Flint Hills Resources.

Group II producer Chevron imposed allocations two weeks later, although it blamed its action on problems experienced by other producers.

Motivas action, then, leaves ExxonMobils Baytown, Texas, plant as the continents only large producer of Group II oils without sales caps in place.

Some lubricant blenders have looked for relief from the launch of a third production train at Port Arthur, designed to increase that base oil plants capacity by 15,000 barrels per day. Motiva has tried to dispel that notion, saying a maintenance turnaround on one of the existing trains – scheduled for spring – would keep the expansion from impacting the market until close to mid-year.

Earlier this year the company said it planned to begin production at the beginning of February, but that schedule has been pushed back several times. Market sources say the company now aims for the expansion to have oil in tanks later this week.

Motiva announced its allocations in a Friday letter to customers, which Lube Report obtained. The company noted that a catalytic cracker and alkylation fuels units at the Port Arthur refinery have been shut down for maintenance since early January.

The complexity related to bringing a new HCU expansion on line in conjunction with a major turnaround has clearly proven to be difficult, the letter said. As a result of numerous challenges we have no choice but to impose allocations.

The letter added that the refinery turnaround will be completed in mid-March and that the sales limits on base oils would remain in effect for all of this month. The letter did not state the size of the allocations.

Lube blenders described resorting to extreme measures to maintain operations. The general shortage of Group II barrels, some said, is exacerbated by the fact that what little supply can be found often does not meet approvals that companies hold for finished lubricants.

Theres one [base oil] that I simply cannot get, said one blender, who spoke on condition of anonymity. I did find three other suppliers with alternative oils, but the volumes each of them had were much smaller than my need. So now Im buying from three suppliers instead of one – just for that one oil.

Several buyers speculated that even opportunities such as these will dry up in the next few weeks and that some blenders will run out of some oils before supply returns to normal. Petro-Canada has said it hopes to resume normal operations early this month. Market sources say Excel Paralubes has set a target date of around March 20 to restart, although its co-owners have declined to comment.

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