Is Oryx on Ice?


Sasol Chevrons proposed base oil plant at the Oryx refinery in Ras Laffan, Qatar, is no longer in line to become the worlds first large-scale source of gas-to-liquids base oils. The company disclosed this week that it has no timetable for the base oil plant, which previously had been slated to open in early 2009.

A Chevron official acknowledged that the Ras Laffan plant may not be built, although he insisted that the joint venture is determined to build a GTL base oil plant somewhere.

We remain very committed to this project and are doing a lot of work to come up with an operational and commercial model that would work, Brent Lok, manager of global marketing and new business development for Chevron Global Base Oils, told Lube Report yesterday. And if our partnership in Qatar does not work out, then we are already pursuing other options.

The change in the status of Sasol Chevrons project leaves a joint venture between Royal Dutch Shell and Qatar Petroleum with the only specific GTL base oil project that is currently moving forward. Shell says it plans to open a giant 30,000 barrels per day plant in Ras Laffan in two stages, in 2010 and 2011.

The news about the Sasol Chevron project also underscores again the evolving nature of efforts to bring large volumes of GTL base oils to the lubricant market, which in the past 13 months has seen a complete shuffling of announced projects. In August 2006, Shell said it had tripled the planned capacity of its Qatar plan. Then, in February, ExxonMobil and Qatar Petroleum scrapped their plan to build a 30,800 b/d plant, also at Ras Laffan, by 2011.

One industry observer said the developments have created a more attractive environment for companies planning or considering plants that would produce Group II or Group III base stocks from mineral oil.

Those guys were worried at the prospect of seeing big GTL volumes falling out of the Middle East, Amy Claxton, principal of My Energy consultancy in Hummelstown, Pa., said when informed of Sasol Chevrons comments. So to have Sasol Chevron step back from their project, after ExxonMobil eliminated theirs entirely – it relieves those companies that had already announced [Group II or Group III] projects and invites more projects.

Sasol Chevrons base oil plant was to be an add-on to the Oryx GTL fuels refinery built by Sasol and Qatar Petroleum, which opened earlier this year. Sasol Chevron officials said this week that their stance on the base oil plant, which was to have had capacity of 8,000 b/d, changed at least several months ago, although they did not publicly discuss specifics until this week.

We remain interested in base oil opportunities, and we are actively engaged in Qatar to see how a base oil project could be developed, Communications Manager Malcolm Wells said Monday. The work done to date forms the basis of this engagement. There is, however, currently no definitive timeline for developing a project.

Chevrons Lok said the joint venture is reconsidering numerous aspects of their plan and may yet decide to proceed. For example, he said, they may increase the scale of the base oil plant. But he allowed that the project has at least been delayed.

If Shell truly achieves the timeline they have laid out, then they would come to market ahead of us, he said. He added that Sasol Chevron has no schedule for deciding if and how to proceed in Qatar.

Officials said a variety of factors contributed to the decision to take a step backward, including a sharp rise in construction costs for the refining industry and delays in the ramp-up of the overall Oryx project. Sasol officials have said recently that they expect to solve early problems that are preventing the fuels refinery from producing to capacity.

If we had to identify the biggest hurdle [to the base oil plant], I think it would be the run-up in capital expenses, Lok said.

Lok said Sasol Chevron is already considering building gas-to-liquids base oil plants in other locations, but he declined to say where.

The world currently has just one source of GTL base oils, a small Shell plant in Bintulu, Malaysia. Among other products, that facility makes waxy feedstock that is transported to base oil plants where it is further refined into base stock.

The lubricants industry has greatly anticipated the larger plants that were scheduled to come online in the next few years because GTL base oils are expected to perform comparably to polyalphaolefins with a cheaper cost basis.

We still think there is a real need for a product like this, Lok said. Its just taking us longer than we thought [to bring it to market], and its certainly going to cost more.

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