The 2 percent to 4 percent of a barrel of crude that is extracted to make lube oils is the most valuable constituent of crude oils. Yet after its use in engines and for other purposes, it is largely relegated for use as a fuel oil or, worse yet, disposed of improperly in landfills or dumped in sewers or on the ground. Over 75 percent of this used oil contains valuable lube oil constituents which are recoverable. Rerefining is one technique for full regeneration and recovery of this valuable oil product.

It is estimated that 2.4 billion gallons per year of lube oil are consumed yearly in the United States. Of this, 1.7 billion gallons wind up in engine oil and hydraulic fluids for the transportation industry. About 1 billion gallons of this are recovered, of which 860 million gallons are burned and 140 million gallons are rerefined. About 400 million gallons are improperly disposed in landfills, sewers, etc.

Recent U.S. Energy Department studies have shown that the environmental benefits of rerefining used oil over burning it, give major improvements in global warming, particulate reduction, and carcinogenic risk potential. The chemicals and metals added to the base oils to produce branded lube oils are released to the atmosphere when the used oil is burned. In addition, the energy saving for rerefining over burning of used oils is 8 percent or better, the State of California calculated last year.

Currently there are two rerefiners in the United States, Safety-Kleen in East Chicago, Ind., and Evergreen Oil in Newark, Calif. There are two more in Canada, Safety-Kleen near Toronto and Newalta in Vancouver. Several rerefineries operate in Europe, and a modern rerefinery has been designed and constructed in Indonesia by Evergreens engineering affiliate, Chemical Engineering Partners. A small rerefinery is being built in Puerto Rico. Several others are in the planning stage.

What is Rerefining?

For purposes of this article, rerefining is meant to include not just distillation of the used oil but also hydrotreating of the distillate to produce a good-as-virgin base oil for later compounding into engine oil, hydraulic fluids and other lubricants. Atmospheric and/or vacuum distillation of used oil to produce a fuel oil or marine diesel are not considered as rerefining.

All rerefiners in North America use the same basic process. The used oil feed-stock is tested and is fed to a flash evaporation unit to remove the 4 to 6 percent water in the oil. This dry-basis oil is then fed to a thin film evaporator (TFE) which separates the lube component and light materials from the heavy material – which comes out of the base and is sold as asphalt flux for use in making roofing tile or as an asphalt extender. These bottoms contain the metals and salts which comprise the additive in the lube oil. These nasty materials are encapsulated and meet all EPA leach tests.

The overhead from the TFE is distilled to separate the lube fraction, which can be as high as 80 percent of the dry feed. It is then treated with hydrogen over several catalyst-filled reactors at a pressure of 1,000 psi. The product is water-white and meets all requirements for base oil used for blending into lube oils and hydraulic oils.

The final hydrogenated product can be separated into various neutral base oils such as 100N and 300N. Evergreen sells its base oils to blender-compounders; Safety-Kleen and Newalta blend some of the base oils themselves for branded and bottled or drummed lube products.

Step by Step

Long before the advent of water-white lube oil rerefining, hydrotreating at varying severity was used to improve color and color stability, and to reduce reactivity of lubricating oils derived via solvent extraction. The resulting lube base stocks were of considerably higher quality than those obtained via clay finishing. This is principally due to a number of chemical reactions that occur during hydrotreatment only, but not during clay finishing. These reactions remove undesirable components and thereby impart improved quality characteristics into the oils. Examples of these reactions are: sulfur removal, nitrogen removal, and hydrogenation of color bodies, olefins and aromatics.

To enable production of high-quality lubricating oils via rerefining of waste lube oils, hydrotreating at moderate severity has to be employed, preferably in three reaction steps. In addition to the objectionable materials derived from additives present in used lube oils, raw rerefined distillates contain trace quantities of metals that must be removed to avoid fouling the hydrogenation catalysts. Used oil also contains a much higher concentration of olefins, which are generated in the auto engine, as opposed to virgin materials. All of these contaminants must be removed or reacted out to produce a high-quality rerefined base oil that is equal to or better than virgin base oils.

Process Advances

The TFE-hydrogenation process has another advantage. This technology preserves the high-quality materials found increasingly in lube oils, namely polyalphaolefins – popularly known as synthetics. PAOs are made by oligomerization of ethylene followed by hydroisomerization; they are high-quality lube components with exceptional lubrication properties. The synthetics sell for up to five times the price of conventional base oils. Preservation of these materials over alternate, irreversible disposal, such as burning, is highly desirable.

Improvements have been made over recent years in the rerefining process. They include fouling control in the front end, reduction of trace metals which foul the catalyst in hydrogenators, testing and selection of optimum hydrogenation catalyst for long life, and general chemical engineering improvements to reduce substantially the investment in equipment and metallurgy. In California, used oil is considered a hazardous waste. It is noteworthy that all rerefineries in North America use the proven TFE-hydrogenation technology – profitably.

Economic Gains

In the United States, a moderate-size city and its suburbs will generate in excess of 15 million gallons per year of used motor oil. Most of this can be collected or purchased from existing collectors who service the quick-lube stations, garages, automotive centers, and major truck owners, as well as public utilities and government fleets such as police cars.

However, it is expensive to collect and haul used oil very far. One can figure 5 cents per gallon per 100 miles, not including the amortization of intermediate tankage and hauling vehicles.

Thus, we have stated the economic case for the minimum size rerefinery, one producing 10 million gallons per year of base oil from 13.2 million gallons per year of dry-basis used oil. The calculations are based on last years typical prices, including crude at $60 per barrel (its much higher now).

The base oil produced is Group I or Group II per API designation. Engine tests qualifying the base oil for blending and compounding are included in the investment. Group II oils can be produced in the same plant with slightly lower yields. The bulk of U.S. automotive lubricants are Group I, but there is a growing use of Group II which has tighter restrictions on sulfur and volatility.

Figure 1 gives the yields and unit costs for the product and feed. A selling price for base oil of $1.85 per gallon is quite reasonable, a discount on the 2005 spot price for virgin base oil, which was over $2.00 per gallon. Used oil feed at $0.34 per gallon is easily achieved in a community where the existing collector is either a partner in the rerefinery, or the project envisions its own collection operation. Where the used oil is classified as a hazardous waste the cost of used oil will be lower.

Figure 2 gives typical economics for a 10-million-gallon base oil rerefinery. Consumptions are based on actual performance including labor and management requirements for a grass-roots facility. Hydrogen as a variable operating expense can be reduced by building a small steam-reforming hydrogen plant with PSA purification for about $1 million installed; however, liquid hydrogen is readily available now in most parts of the United States. The hydrogen supplier will include the metering and vaporization and compressions facility in his offer.

The net operating earnings provide the figure known in the financial community as EBITDA, earnings before interest, taxes, depreciation and amortization. This figure compared to the total project cost determines the financial ability of the project. Thus, in the example, an EBITDA of $10 million for a $9.2 million total project cost is eminently financible.

Obviously, the feedstock cost is the highest single cost for the project – more than the total variable cost and about the same as the total operating expense. Figure 3 gives a plot of EBITDA at various feedstock costs between 10 and 70 cents per gallon, dry basis. Rerefined lube base oil sales prices at $1.60 and $1.85 (base case) and $2.00 per gallon are shown. This graph illustrates the importance of feedstock price. However, even with feedstock at 60 cents, the EBITDA can be healthy.

With the fixed costs being constant for larger capacity plants, the higher-capacity rerefinery has even better financial returns, but one must consider the higher cost of moving used oil greater distances. Another consideration is plant location. A plant may be sited at an existing collection depot with many of the tanks and other support in place, such as office, lab, electrical supply, loading and unloading racks, and land. However, if a grass-roots site is considered, the added investment for utilities, buildings, etc. is about $3 million per refinery.

The Bottom Line

As a result of years of experience and good engineering, rerefineries are affordable and eminently profitable, especially when oil prices are high and bound to stay high or go higher. Base oil prices over the past year, derived from the most valuable small percentage of a barrel of crude, at $2.00 per gallon equate to $84 per barrel. Compare this to crude, untreated and not refined, at $60 per barrel in the case study – or to the current $72 per barrel. Base oil prices will continue to climb as old, inefficient solvent extraction refineries are taken out of production by the majors.

Environmental benefits of rerefining are enormous and have drawn the attention of government, state and local authorities. The economics are very attractive to the financial community, the result of good chemical engineering to simplify the process combined with modularization of most of the rerefinery. Great progress has been made in the rerefining industry.