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Base Oil Report


AB Nynas Petroleum solidified its position as the worlds largest naphthenic base oil marketer in August, entering an agreement to handle all of the naphthenics produced at the former Lyondell-Citgo Refining plant in Houston. The Swedish company indicated afterward that it wants to further expand its business ahead of anticipated new demand from the tire industry.

Nynas stepped in to fill a void left by Citgos exit from its 13-year-old joint venture with Lyondell Chemical Co. Citgo owned a 41.25 percent stake in the refinery and was responsible for marketing all of the base stocks it produced. Now owned solely by Lyondell, the refinerys base oil plant has capacity to make 3,600 barrels per day of naphthenics and to process paraffinic feed-stock into 1,000 b/d of white oils. Citgo will continue selling the latter product.

The deal with Lyondell gives Nynas control of 19,700 b/d of pale oil capacity, including its plant in Nynashamn, Sweden, and marketing agreements involving Valeros plant in Three Rivers, Texas, and a Curacao, Netherlands Antilles, plant operated by Petroleos de Venezuela S.A. Ergon Refining is the second-largest naphthenics marketer, with its 11,400-b/d plant in Vicksburg, Miss.

The naphthenic oils produced by Lyondell – the refinery has been renamed Houston Refining LP – are largely used as process oils by U.S. customers such as rubber manufacturers. This contrasts with Nynass existing business, which focuses on the international electrical transformer oil market, but officials said the company is glad to enter the former arena, especially since tire industry demand for naphthenics is expected to jump in the next few years.

In fact, Nynas thinks it needs even more barrels to accommodate that demand. The company tells customers it is considering three means of growing its business: expansion of existing facilities; new plant construction; or more marketing agreements.

Nynas officials declined to say whether they want Lyondell to upgrade or expand naphthenic capacity in Houston. The 2003 agreement with Valero included a $15 million plan to do both at Three Rivers. Nynas completed that quality upgrade in 2004, but officials now admit that the expansion did not take place.

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