Group III Flows in Malacca Straits

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KUALA LUMPUR, Malaysia – New API Group III refineries on both sides of the Malacca Straits are making the Singapore-Malaysia-Indonesia region a new center of high-end base oil production. Petronas Melaka plant will begin on-spec production by late October, and directly across the Straits, SK-Pertaminas joint venture in Indonesia reportedly began commercial production two months ago.

The Petronas Group III refinery in Melaka, Malaysia, is now 96 percent complete, Petronas Base Oil CEO Joe Rousmaniere told Lube Report yesterday. Its mechanical completion date is the end of July, and on-specification production is expected by the end of October. The next stage will be the reliability run, at about 50 percent capacity, with provisional acceptance by technology provider ExxonMobil Research and Engineering.

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By late December we should be ready for full production, which in the first year means about 80 percent of capacity, or 240,000 metric tons per year, Rousmaniere said.

Across the Malacca Straits, in Dumai, Indonesia, the SK-Pertamina Group III joint venture began production on or ahead of schedule in late April, according to sources outside the company. The plant, with 7,250 barrels per day of Group III capacity, is reportedly ready to ship base oil to North America for sale by late summer. Seoul, Korea-based SK Energy, which will market the joint ventures output, has not responded to multiple requests for information about the plant.

In addition to the new Petronas and SK-Pertamina plants, ExxonMobil operates an 18,000 b/d Group II plant in Jurong, Singapore, so the Singapore-Malaysia-Indonesia region will have a total of 31,750 b/d of combined Group II and III capacity when the new plants reach full production.

The product slate at the Petronas Melaka refinery has changed from original predictions, Rousmaniere told Lube Report during an interview at his Petronas Twin Towers office yesterday. The company initially predicted that its 6,500 b/d of capacity would be 45 percent Group III 4 centiStoke, 35 percent Group III 6 cSt, and 20 percent heavy Group II output. But now, said Rousmaniere, it will be 100 percent Group III, with 20 percent 10 centiStoke. With adjustments, he explained, this unique heavy Group III can become an eight-and-a-half centiStoke oil, that can be used in viscosity modifiers or heavy-duty engine oil.

Petronas Base Oils marketing operations are well advanced, Rousmaniere continued. We want Petronas people selling direct to the market as much as possible. Sixty to 70 percent of the refinerys initial output is already committed to customers, he said. Petronas acquisition last year of Italian lubricant blender FL Selenia, which overnight made Petronas the worlds fifteenth largest lubricant manufacturer, will not keep the company out of the merchant base oil market, he added; Selenia, now Petronas Lubricants International, will take no more than 20 percent of the refinerys total output.

Rousmaniere emphasized that Petronas differs from much of its new Group III competition because its feedstock differs. We are not using hydrocracker bottoms, he said. We use a waxy residual called low-sulfur waxy resid, or LSWR. This protects the Petronas base oil plant from the volatility of the fuels market, because the LSWR is processed to produce 50 percent diesel and 50 percent base oil. That ratio cannot change, he noted, so were not at the mercy of the diesel people. Were coproducing diesel.

With hydrocracker bottoms, he explained, when diesel prices spike, a refinery may make up to 95 percent diesel and just 5 percent base oils. The result is not just less quantity, but the chemistry changes, so you can only make a 3 or 4 cSt product. You have inconsistent quality and quantity.

The drawback, Rousmaniere acknowledged, is the plants dependence on its feedstock source. We must have consistent feedstock supply, and weve made provision to do that for the next 20 years. We are the [Malaysian] national oil company, and we have our own crude.