As this issue went to press, Shell had scheduled an early October opening ceremony for its lubricant blending plant in Torzhok, Russia. The event was a long time coming as Shell first announced the project in mid-2009. Initially the company estimated that it would start up by the end of 2010, but delays pushed back the target date twice – first to the end of 2011, then to the middle of this year. Some competitors are bound to mention the projects tardiness; after all, how often does one get a chance for a dig at the worlds biggest lubricant supplier.
But the lasting significance of the plant will be not the date that it opens but rather its size. Its designed to make 180,000 metric tons of lubricants per year. Moreover, the real significance is that the Torzhok facility does not appear to be unique, but is instead part of a broader trend toward bigger blending plants.
Blending plants come in all sizes, from a few thousand tons per year to six figures. Anything over 100,000 t/y may be considered large. Shell claims that the Torzhok plant is the largest in Russia, in addition to being the countrys first large foreign-owned blend plant. It is also one of the largest in Shells network of blending plants.
Shells facility is one of a number of large lubricant plants built recently or now under construction. Jordans Qais Alrawi & Sons opened a 100,000 t/y plant in that country in 2010. An Enoc plant that opened in Fujairah, United Arab Emirates, last year currently has the same capacity, but the company claims that it has plans to expand it to 250,000 t/y. Rowe Mineraloelwerk plans to open a 120,000 t/y plant in Worms, Germany, next year. And Russias Lukoil claims that it will surpass the capacity of Shells Torzhok plant in 2015 by expanding capacity of its Volgograd lubricant plant to 240,000 t/y.
Whats behind all of the large projects? This issues article on packaging lines (see page 40) quotes Europacks Werner Moeller as observing the same trend. Moeller says companies are building large plants in an attempt to gain economies of scale. That certainly makes sense; its well-proven that large manufacturing facilities can reduce per-unit production costs.
Will all of these new plants signal the demise of smaller operators? Probably not. Some companies could be pressured out of business, but many small businesses operate on business models where per-unit costs are not so critical. For example, they may serve a niche market that is somewhat insulated from larger suppliers. Small companies are often creative and adaptive. Many should survive even as bigger suppliers streamline their operations.