ABU DHABI, United Arab Emirates – Takreers flagship 600,000 tons per year API Group II/III base oils plant at Ruwais, U.A.E., is facing further delays and may not start production this year, according to an executive at Abu Dhabi National Oil Co.s marketing and refining directorate.
We expect production to start sometime in the fourth quarter, said the executive, who asked not to be named. It might be October, or it could be later. Takreer, which is wholly owned by Adnoc, is conducting precommissioning trials to iron out technical problems, the spokesperson added.
However, industry analysts say the latest delay may not be a bad thing. Dr. Stefan Mueller, senior principal analyst at IHS Chemical, thinks market conditions could be a factor. There is a global oversupply of Group II and Group III. In this case, coming a bit later to the party wont hurt. He also downplayed the idea that the delays are indicative of wider problems. Its a big project, so delays in that order of magnitude are common.
The plant will produce up to 500,000 metric tons per year of Group III and 100,000 t/y of Group II. All early production is earmarked for Asia, but Adnoc is not disclosing the exact markets. We are targeting Asia as a whole for the initial production volumes, the executive commented. Adnoc previously said it wanted to tie initial production volumes to customer contracts, which it has claimed was one of the reasons for delay.
India is expected to be a big market for Takreers Group II base oils, particularly as the countrys automotive market gravitates toward higher quality lubricants.
Price will be a major consideration, according to T.R. Kumar, managing director of Tesla Lubricants in Dubai. Some Group II prices are already below Group I rates so it will be a supply/demand issue there.
Around 50,000 t/y is earmarked for Adnoc Distribution, a marketer and distributor of petroleum products primarily in the U.A.E. which is responsible for marketing Takreers base oils. A source familiar with the discussions says Adnoc has been in talks the Emirates National Oil Co. about selling its base oils to the Dubai-based toll blender.
Originally due to come on stream in December 2013, commissioning was initially delayed six months, to June 2014.
Last year, rumors began to circulate that Finnish refiner and marketer Neste would not be marketing Takreers base oils, which Neste confirmed in a September stock market announcement. The breakdown in discussions surprised many, with some questioning Adnocs strategy to continue without Nestes involvement.
In 2007, Neste, Takreer and the Austrian oil and gas group OMV had signed a heads of terms agreement for the design, construction and operation of the plant, which envisaged Neste handling the marketing of VHVI Group II/III base oils. Neste said at the time that the joint venture would be 60 percent owned by Takreer and 20 percent by Neste and OMV, respectively. However, in 2010, Takreer awarded the EPC (Engineering, Procurement and Construction) contract to Hyundai Engineering and joint venture negotiations ended in early 2011. Discussion over the residual marketing agreement with Neste ended in 2013.