Construction of the Petronas Melaka Group III base oil refinery, or MG3, Malaysias first base oil plant, was about 40 percent complete when LubesnGreases toured in June. Reactor towers, the largest weighing 400 tons, were in place, and the 300-ton vacuum distillation unit lay on its side, ready for cranes to raise it. Construction crews swarmed the site, installing feed tanks, intermediate tankage, dedicated pipelines and finished product tankage. Huge cranes – the largest brought in 76 segments by a 76-truck convoy from Singapore and assembled on site – dwarfed the units they lifted and positioned.

In about one year MG3 will come online, producing 5,200 barrels per stream day of high-quality API Group III base oils, pmarily for export to top-tier markets in the West and Japan, and another 1,300 b/d of Group II for sale in Southeast Asia.

BACK STORY

Melaka is the largest refining site in Malaysia, said Colin Wong HeeHuing, managing director and CEO of the Petronas Melaka refining complex,and it produces 40 percent of the countrys refined petroleum products. Petronas launched the base oil projection 2004,and its now in the final construction and commissioning phase.

The 926-acre site has two processing trains, explained Hamzah Ahmad, MG3 project director. The first, a sweet-train hydroskimming facility that can process 115,000 b/d of crude, began operations in 1995 and is 100 percent owned by Petronas. The second, a sour-train deep conversion facility, with capacity of 125,000 b/d, started up in 1998 and is 53 percent owned by Petronas and 47 percent by ConocoPhillips. The MG3 project, Ahmad emphasized, is 100 percent owned by Petronas.

Feed for the units is Petronas own crude, he continued. The waxy residue from the first refinery train will become the primary feedstock for MG3.

Common facilities at the refinery site include tank farms; a T-shaped jetty 1.5 kilometers wide and 1 km long, with 10 berths and single-buoy mooring for very large crude carriers; a fire station owned and operated by the facility with seven fire trucks and nine full-time firemen; a 22-bay tank truck loading rack; multiproduct pipelines and an ISO/IEC 17025-certified laboratory. A cogeneration project was ready to be commissioned last month, to provide the complex with reliable on-site power and steam and significantly reduce costs.

Also on site, said Ahmad, is the Petronas Lubricant Units blending plant, where its Synthium and Sprinta brand motor oils are among the products currently made by using imported base oils.

Under Colin Wongs leadership, the refinery complex has seen robust changes since 2003: increased efficiency that has earned it top rankings in Solomon Associates latest refinery benchmarking studies; construction of the cogeneration plant to control costs; and development of MG3 to increase value.

BASE OIL MATH

Refinery economics were the driver, said Joe Rousmaniere, CEO of Petronas Base Oil in Kuala Lumpur. The feedstock was going into low-value fuel. Now it will go into $1,000-per-ton base oil.

MG3 is part of an expansion project for Petronas wholly owned processing train, using technology licensed from ExxonMobil Research & Engineering to upgrade the waxy VGO and hydrocracker bottoms to produce Group III base oils. From 2004 through mid-2005, the basic engineering design was done by a consortium of Foster Wheeler and OGP Technical Services. In December 2005, the construction and commissioning contract was awarded to a consortium of Lurgi AG, Larsen & Toubro and KQKS.

The project is on schedule to come on line in late 2008. Cost of the project, LubesnGreases gauges, is in the range of $300 million to $400 million. Petronas declined to confirm the cost, however.

Major elements of the MG3 plant are the vacuum distillation unit, where feedstock is fractionated into lube distillates, the intermediate tank where distillates are stored prior to processing, and the hydrotreating, dewaxing and hydrofinishing units. In these last three, base oil is produced by rearranging hydrocarbon molecules to meet required product specifications. Final product tankage will include dedicated rundown lines for different product grades, storage and loading facilities and a pigging system to avoid product contamination.

New equipment specific for base oil testing in the refinery laboratory includes a cold-cranking simulator, Brookfield viscometer, Noack tester and solvent dewaxing apparatus. Lab personnel are being trained at hydroprocessing pilot plant facilities in the Petronas research center in Bangi, in the suburbs of Kuala Lumpur.

Manpower requirements at the new MG3 plant, said Ahmad, will total 50 (two managers, 12 executives, including engineers, and 36 technicians). This is in addition to the 970 employees of the existing fuels refinery complex.

At startup, the MG3 plant will be configured to produce two grades of Group III base oils, to be sold under the companys Etro brand. At the time of LubesnGreases visit the product mix was projected to be roughly 60 percent Etro 4 (a 4 centiStoke 100 neutral) and 40 percent Etro 6 (6 cSt 150 neutral). The plant also has the ability to add other grades at a later date. In addition, 1,300 b/d of Group II 500 will be produced, bringing total capacity to 6,500 b/d.

MOVING BARRELS

Were going where people need superior quality oil: Europe, Japan and, if any is left over, well go to the U.S., said Rousmaniere, who is putting together a base oil marketing team that will number about 25 in Kuala Lumpur and another 10 or 12 abroad. Malaysia doesnt need much Group III; at best itll take 10 percent of our production.

With the Etro 4 and Etro 6 base oils destined for blending high-quality, lower viscosity engine oils, securing approvals has been an essential first step in Petronas marketing plan.

We worked with Exxon Mobil to produce base oil from their pilot plant, said Ong Eng Kiang, Petronas Base Oils technology manager. We used 150 drums for testing programs, using the ExxonMobil technology, at extraordinary expense.

Petronas has worked with additive suppliers Lubrizol and Infineum over the past two years to secure approvals, using their engine oil additive packages. We have API SM and GF-4 approvals with Lubrizol and Infineum additive packs, as well as [ACEA] C2 and C3, and we are working on major OEM approvals in Europe, plus other programs running, Ong said. In the future, we will be more active working with the OEMs.

Base oils is a new area for Petronas, Rousmaniere said, and big gates are opening now for Petronas base oil. Eighty percent of our base oil will go out by sea and we can deliver anywhere in the world, not least because we have access to our own fleet of ocean tankers. He added, The city of Melaka has a great history. Five hundred years ago it was the center of the worlds spice trade. Next year it becomes home to the worlds best base oil plant.

Petronas isnt alone in targeting the base oil markets in Europe and Japan, where Group III is in high demand and tight supply. GS Caltex plans to begin producing 3,000 b/d of Group III and 12,000 b/d of Group II at a new plant in Yeosu, South Korea, by the end of this year. A Pertamina-SK Corp. joint venture is constructing a 7,500 b/d Group III plant in Dumai, Indonesia, which is scheduled to begin production in 2008. Other less-certain projects have been announced for 2009 and beyond, including the bally-hooed arrival of gas-to-liquids base stocks from Qatar.

Certainly the coming year promises relief for engine oil blenders thirsty for Group III, and Petronas aims to assure that Etro helps quench that thirst.