Russian base oil producers envision modernizing their plants to add 1.6 million metric tons per year of API Group II and III capacity by the early 2020s, according to an industry insider. Meanwhile, the countrys imports of high-quality base oils are expected to remain high, as the current unstable economic and political situation in the country casts doubt on whether some of the projects can be finished on time.
Industry developments in Russia are part of a general trend in the global base oils industry that include more than doubling total global Group II and III capacities by 2020, according to Vladimir Kapustin, head of Moscow-based research and design institute VNIPIneft. This trend also includes increasing the share of high viscosity index base oils as well as Group I base oil capacity reductions and their replacement with Group II capacities, he told WRAs CIS Downstream Week conference in Berlin in December.
VNIPIneft , a Moscow consultancy, found that the Asia-Pacific region will drive global base oil consumption. Demand in this region is expected to increase from almost 16 million tons in 2014 to almost 19 million t/y by 2020. Some regions such as Africa, the Middle East and Latin America are expected to stagnate, while North American and European base oil markets are expected to shrink, Kapustin said.
Russian Market Overview
During the next 10 years, Russian refiners will switch to hydrocatalytic processes and abandon the old way of manufacturing base oil that employs dewaxing and solvent extraction technologies. Some, such as Lukoils Nizhny Novgorod and Rosnefts Novokuibyshevsk refineries are planning to close their old installations that use conventional processes of dewaxing and solvent extraction, Kapustin said. Others, such as Rosnefts Angarsk and Lukoils Volgograd refineries, are planning to rationalize and improve their Group I base oil production.
In 2013, Russia produced 2.3 million tons of base oils and lubricants and imported an additional 400,000 tons of primarily
high-quality base oils, according to VNIPIneft. Group I and II base oils accounted for 97.4 percent share of the countrys total base oil output (Group II being only a tiny fraction this total), while Group III base oil accounted for just 2.6 percent of Russias total base oil output. VNIPIneft also found that in 2013, additive production in the country reached 30,000 tons, and an additional 18,000 tons were imported.
Russias base oil industry development envisions several new and upgraded facilities with total a capacity of 1.64 million t/y to be put into operation by the early 2020s. By this time, these plants are expected to produce 1.03 million tons of Group III base oil and 607,000 tons of Group II base oil. The countrys base oil consumption is forecast to reach almost 700,000 tons by 2020, up from the expected 590,000 tons in 2015, Kapustin said.
By 2020, consumption is projected to break down as follows:
- Group I demand is expected to shrink from the current 380,000 tons to 360,000 tons.
- Group II demand is expected to increase from 18,000 tons to 30,000 tons.
- Group III demand is expected to rise almost two-fold, from 150,000 tons to 255,000 tons.
- Group IV base oil demand is expected to rise slightly, from 43,000 tons to just 48,000 tons
Planned Projects
After years of planning and delays caused by changing market conditions, Russias new petrochemical export tax codes and economic sanctions stemming from the conflict in Ukraine, almost all Russian base oil marketers postponed plans to add Group II or III production. Some, such as Lukoil, pushed back commissioning dates from the mid-2010s to the early or mid-2020s.
The market changes left only three oil majors confident about revamping their base oil production – Rosneft, Gazprom Neft and Lukoil – according to VNIPIneft. Tatarstan, Russia-based Tatneft recently started Group II/III production at its Nizhnekamsk refinery, making it the first Russian oil major with large-scale, high-quality base oil capacity.
Rosnefts Angarsk refinery is getting ready for a revamp that is expected to reconfigure its 280,000 t/y base oil plant by 2019, according to Kapustin, who said the plant will use hydroisomerization and hydrofinishing technology licensed from ExxonMobil Research and Engineering. Following the modernization, its capacity will include 66,000 t/y of Group I (down from the current 300,000 t/y), 128,000 t/y of Group II and 86,000 t/y of Group III, Kapustin revealed.
The revamp that Rosneft is planning in Novokuibyshevsk could make that plant Russias largest Group II producer, with 400,000 t/y total capacity. The project is intended to be completed in two phases. The first phase is under construction now and scheduled to wrap up by the end of this year; the second is to be finished by 2018.Novokuibyshevsk will use solvent extraction and hydrocatalytic technology from ExxonMobil along with wax isomerization and hydrotreatment technology from Chevron Lummus.
VNIPIneft found that Lukoils Volgograd refinery revamp could include deasphalting and solvent extraction units and construction of a new vacuum gasoil hydrocracking, hydrodewaxing and hydrofinishing complex, using technology licensed from ExxonMobil. The first phase is expected to be ready by the end of 2019. The plants modernization could provide 130,000 t/y of Group I, 230,000 t/y of Group II and 35,000 t/y of Group III base oils, Kapustin said.
Volgograd currently has capacity to produce 25,000 t/y of Group III base oils and 495,000 t/y of Group I. Another Lukoil plant set for modernization is located in Perm, but it is not known what licensed technology it will employ. What we know is that the revamp could provide capacity to manufacture 350,000 t/y of Group II base oils, Kapustin said.
Gazprom Nefts Omsk refinery is set for modernization and expansion. The project is expected to add 150,000 t/y of Group II and 75,000 t/y of Group III capacity, and it could also increase Group I capacity from the current 240,000 t/y to 280,000 t/y. The modernization is planned to be ready in the early 2020s, and it will employ hydrodewaxing and hydrofinishing technologies, Kapustin said.
Slavneft, a joint venture between Gazprom Neft and Rosneft, is also set to modernize its base oil production. The revamp could include a unit for hydrodewaxing and hydrofinishing of hydrocracked fuel residue, according to VNIPIneft. Its capacity will include 100,000 t/y of Group III base oils only, and is expected to go onstream by the end of 2018, Kapustin reported.
Finished Projects
Among all of Russias companies, only Tatneft has completed a modernization project. Last month, it started commercial production of a base oil plant at Nizhnekamsks Taneco refinery.
VNIPIneft, as general designer of the plant with capacity to produce 100,000 t/y of Group III and 90,000 t/y of Group II base oils, complained that it faced procurement problems such as incomplete equipment and lack of equipment documentation from manufacturers such as Italys Howden or Indias Chempex. However, Kapustin said, It is a big success and it looks wonderful how Tatneft and VNIPIneft realized their long-sought plans to build the plant, the first of its kind in Russia.