Two base oil plants to open in 2011

02 June 2010
With the coming into production of two manufacturing facilities early next year, the Gulf Co-operation Council (GCC) states as a bloc will emerge as the largest exporter of a downstream crude product that is most widely used as a lubricant in the world today. The region has for years been the largest exporter of oil, but is slowly emerging as an export hub for downstream crude products - especially base oils and petrochemicals.

Shell's Pearl gas-to-liquids (GTL) project in Qatar, which is set to start early next year, will have a production capacity of 30,000 barrels a day of high-quality, so-called Group 3 base oils. Besides Shell, Finnish refiner Neste Oil is also due to complete a Group 3 base oils plant in Bahrain next year with a production capacity of 400,000 tonnes, or about three million barrels a year. Both companies will be able to take advantage of the GCC's geographical position as a swing supplier between the developed and fast-developing markets.

Base oils are used for making lubricants. The base oils fall into four groups, and each group is identified by numbers ranging from one to four, such that each group is distinct by its viscosity. The Group 3 base oils have an API gravity ranging in between 39.8 and 37.2 which suggests that they have a very low sulphur content.

"The Mideast Gulf is gearing up to become the world's largest producer of high-quality lubricant feedstock from early next year, while its advantageous location will allow it to supply both the developed markets of Europe and the US, and the fast-growing markets in Asia," a Singapore-based analyst said.

"That will make the GCC one of the world's largest producers of the feedstock used to make engine oils that increasingly form a key part of vehicle makers' measures to boost fuel efficiency and reduce the environmental and health impact of car emissions."

The rise in global demand for Group 3 base oils and increasing trade - especially from the GCC - prompted global price reporting agency Argus Media to introduce a European Group 3 base oil price assessment in May. The agency had earlier launched a base oil benchmark for the Middle East. Termed the Argus cif UAE, the benchmark prices the entire base oil volumes sold in the Middle East. This is the region's first-ever base oil benchmark.

Most of the Group 3 base oils produced in countries Qatar and Bahrain will head to Europe and China; earlier it was the Asia-Pacific that met demand in these lucrative markets. European motor fuel specifications are already among the tightest in the world.

By Shashank Shekhar

© Emirates Business 24/7 2010

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