Victor Keppens of Chevron Technology in Gent, Belgium, made the announcement at the ICIS World Base Oils Conference here on Feb. 15. Chevrons disclosure parallels the joint Shell-Motiva announcement at this conference a year ago, when Shell said it would supply Europe with Group II from Motivas massive Port Arthur, Texas, refinery.
Keppens argued that there is a need in Europe for Group II base oils, which are manufactured primarily in North America and Asia. In the near term, he said, it will provide relief for current Group III shortages. Group III production in Europe is projected to be flat through 2010, at about 485,000 metric tons per year, while annual regional demand rises to 1.2 to 1.5 million tons, he said.
Looking at global Group II supply and demand, Keppens said that a Group II surplus will exist through about 2009, but that supply and demand will be balanced in the longer term, through 2015.
Near term applications for Group II in Europe are those with relatively low qualification costs, Keppens said, including natural gas engine oils, turbine oils, compressor oils, paper machine oils and metalworking fluids. Longer term, zero-sulfur Group II is ideally suited for blending low-SAPS engine oil formulations, it provides flexibility to formulators and reduces dependence on Group III suppliers.
Alan Outhwaite of Chevron Global Lubricants inLondon was one of several industry speakers at the conference who noted that heavy duty engine oils in particular may be a good match for Group II base stocks.
Lubrizols Alison Fisher, global business manager for heavy duty diesel engine oils based in Derby, U.K., reported on the new ACEA heavy duty E9 specification scheduled for first use in 2008 and said that Group II is a good fit for that category. Infineum UKs Sylvain Leblanc agreed, but emphasized that OEM approvals are critical. We need security of supply to make that big investment, said Leblanc, referring to the expensive testing needed to obtain automakers engine oil approvals in Europe.
Chevron is in exporting [to Europe] for the long term, said Chevrons Outhwaite, and additional capacity is in the works.
A Chevron spokesman in the companys San Ramon, Calif.,headquarters confirmed yesterday that the company anticipates capacity increases through debottlenecking and capacity creep that will amount to additional thousands of barrels per day.
Chevrons Richmond, Calif., base oil plant on the U.S. Pacific coast now has capacity to produce a total of 16,000 b/d of Group II and Group III base stocks. This compares with Motivas 40,300 b/d Group II capacity in Port Arthur, Texas, on the U.S. Gulf of Mexico coast.
Chevron already inventories Group II base oils in the Gulf Coast, the spokesman said, noting that the price premium of 10 to 12 cents per gallon between U.S. West Coast and Gulf Coast prices is close to the freight cost between those points.
The timing of the Chevron announcement was driven by the low-SAPS ACEA E9 spec, because blenders and additive suppliers in Europe are selecting base oils and additives now for qualifications. Theyre very nervous about base oil availability, so were actually ahead of schedule to demonstrate commitment to the market, the spokesman said. Base oil suppliers have come in and out of Europe, and people remember that. We will build inventory in Europe.