In series of announcements in July, H.F. Sinclair said it will close its Petro-Canada base oil plant in Mississauga, Ontario, and disclosed arrangements for replacement suppliers.
The end result is that a Canadian source for API Group II and III base oils consumed mostly in the United States is being replaced by a Group II supplier in the U.S. and a Group III supplier in South Korea. One analyst said the closing will probably exacerbate the current base oil crisis stemming from the war in Iran.
The decision to stop making base oils was announced in tandem with H.F. Sinclair’s statement that intends to separate its base oils and lubricants operations into a separate, publicly owned company. Company officials said the move will allow the new business to focus on and invest in its strengths
“As an independent company, Lubricants & Specialties will operate a capital-light business model built for greater financial flexibility and stronger, more consistent free cash flow — while leveraging its core strengths in technology, globally recognized brands and extensive channels-to-market,” Sinclair said in July 28 news release.
The base oil plant at H.F. Sinclair’s oil refinery in Tulsa, Oklahoma, United States, will continue to operate, but Sinclair implied that it will not be owned by the new lubricants business, stating that the latter will have “continued access” to the base oils and specialty products produced there. The Tulsa plant has capacity to make 9,500 barrels per day of Group I stocks.
The Mississauga plant has nameplate capacity to make 11,600 b/d of Group II and 4,000 b/d of Group III. Acquired in 2018 when H.F. Sinclair’s predecessor, Holly Frontier Corp., purchased Petro-Canada from Suncor Energy, the facility has long been one of the largest sources of base oil imports the United States. In 2025, Canada exported 3.2 million barrels of base oil to the U.S., accounting for 21% of U.S. base oil imports. The Mississauga facility is the only base oil plant in Canada.
But observers said they were not surprised at its closing. The Mississauga site has not produced fuels since Suncor closed its fuels refinery in 2010, a year after the merger between Suncor and Petro-Canada. This means the refinery does not produce vacuum gas oil feedstock feedstock for the base oil plant.
“That has forced the Mississauga base oil plant to purchase feedstock from other sources, often distant sources, which increased costs,” said Amy Claxton, CEO of My Energy consulting firm in Hummelstown, Pennsylvania, United States. “That has hurt profitability of the operation.”
Ceasing base oil production eliminates that dynamic. H.F. Sinclair said it will continue finished lubricant blending and packaging and research and development operations at Mississauga, along with supply chain, logistics and commercial activities.
Along with Group I base stocks from Tulsa, H.F. Sinclair said the new lubricants and specialties business will continue supplying Group II and III base stocks, but now these will come from other sources. Shortly after disclosing the decision to close the base oil plant, H.F. Sinclair announced agreements for the new business to be supplied Group II oils by Chevron and Group III oils by SK Enmove. The lubricants and specialties business will serve as SK Enmove’s Group III distributor in North America and as Chevron’s Group II distributor in Canada and parts of the U.S.
Those agreements mean Sinclair’s lubricants and specialties business can continue supplying existing base oil customers, but a consultant said Mississauga’s closing is still a bad development for lubricant manufacturers, especially in light of the current crisis.
“Yes, in my opinion, the decision risks significantly exacerbating the current supply crisis for high-quality base oils,” said Geeta Agashe, President of Geeta Agashe & Associates. “While the parent company has secured alternative sourcing agreements, the structural changes introduce major vulnerabilities into an already highly strained global supply chain.”
The war in Iran and the halting of ship traffic through the Strait of Hormuz have triggered a historical disruption to the base oil market, causing global shortages and sharp spikes in base oil prices. The Group III segment has been particularly hard hit, due to the cut-off in supply from three Group III plants in the Middle East Gulf. Industry observers expect the problems to last well into next year, even if the conflict between the United States, Israel and Iran resolves and the strait reopens soon. Analysts say it will take months to recall vessels needed to ship material from the gulf, and two of the area’s Group III plants have suffered damage that will take time to repair. The crisis could still be going on, therefore, when the Mississauga plant closes. H.F. Sinclair said it plans to wind down base oil production during 2027.
“The site is one of North America’s premier producers of Group III base oils,” Agashe said. “As you know, these are the critical, highly-refined ingredients required for modern synthetic motor oils, other lubricants, electric vehicle fluids and data cooling centers.”
Besides removing a manufacturing site from the global supply base, the lubricants and specialties business will replace a North American Group III supplier with one from outside the continent. SK Enmove is by far the world’s largest Group III supplier. It owns a 26,000-b/d Group III plant in Ulsan, South Korea, and has two joint ventures — 10,000-b/d Group III partnership with Pertamina in Dumai, Indonesia, and a venture with Repsol in Cartagena, Spain, with capacity to make 5,900 b/d of Group II and 11,000 b/d of Group III.
“Shifting to a global import model introduces acute geographic risks,” she said. “Sourcing Group III oils from other regions requires traversing volatile international shipping lanes. Ongoing drone and missile threats in the Bab el-Mandeb Strait and the Black Sea mean that maritime supply lines are increasingly fragile and expensive.”
Since 2024, much shipping traffic from Asia to Europe and the Americas has avoided the Red Sea and the Suez Canal because of the threat of attacks by Houthi militants in Yemen. Instead, vessels have detoured around the southern tip of Africa, adding weeks to voyage times and considerable cost. H.F. Sinclair’s announcement did not discuss the site of origin of the Group III oils it will receive from SK Enmove.
Chevron operates two Group II plants in the United States — one in Richmond, California, with capacity to make 19,000 b/d of Group II and 2,500 b/d of Group III and a 25,000-b/d plant in Pascagoula, Louisiana.
The United States has long had a deficit of Group III production capacity, forcing it to import significant volumes. Two construction projects now underway will increase domestic Group III production. Chevron plans to bring online an upgrade to its Pascagoula plant late the year or early next year. It has not yet disclosed the size of that project. ExxonMobil is adding 8,000 b/d of Group III capacity to its Baytown, Texas, plant in a project scheduled to be completed in 2028.
While those additions would offset the Group III loss at Mississauga, Agashe said it’s not clear how things will shake out for North American lube blenders. Chevron has said it expects to supply at least some of Pascagoula Group III to Europe. “Those projects will help a bit,” Agashe said, “but as these two players [ExxonMobil and Chevron] have such massive finished lubes footprints, I’m not sure how much volume will be available to sell into the merchant market.”
Tim Sullivan is executive editor for Lubes’n’Greases. Contact him at Tim@LubesnGreases.com.