With limited in-country production of premium base oils, this agreement will help meet tightening lubricant specifications by creating a de facto source of local supply while minimizing import complexities for lubricant formulators, Chevron said in a statement.

Wai-Fong Chen, Chevron base oil product manager for Asia-Pacific, told Lube Report Asia that the base oils will be primarily imported from Richmond, California, in the United States; the companys joint venture plant in Yeosu, South Korea; and from storage in Singapore.

Output from Chevron’s Richmond and Yeosu plants, as well as its refinery in Pascagoula, Mississippi, are all fungible, Wai-Fong said, noting that the company can supply Australia from various supply points as supply constraints dictate. “For example, if Richmond is going through a turnaround, we can also import from Pascagoula.”

As it has elsewhere, Chevron is plugging the idea that Australian regulations on automobile emissions require higher-performance engine oils that should be formulated with Group II base stocks.

Currently, there is no local production of virgin Group II base oils in Australia. Caltex shut down its base oil refinery in Kurnell, just outside of Sydney, in 2011. It had been the last Group I plant operating in Australia after BP, ExxonMobil and Royal Dutch Shell ceased base oil production in the country between 2002 and 2004.

Australias base oil production comes from rerefiners such as Cleanaway, which produces Group II from used engine oils. Other rerefiners, such as Northern Oil and associated company Southern Oil, have the capacity to make Group II, but only produce Group I from the used oils they collect. Both rerefiners produce about 71,000 metric tons per year, said Northern Oil Managing Director Tim Rose. He estimated that demand for all base oil grades in Australia is around 575,000 t/y.

Chevron Singapores distribution agreement with Caltex Australia will increase competition for supplying Group II against other importers, including Hilditch Pty Ltd. and Quality Logistic Services Australia. Hilditch imports Group II from the Shell-Hyundai joint venture in South Korea, Group III base oils from South Koreas SK Lubricants and bright stock from Thailands IRPC. QLSA imports and distributes Group I, II and III base oils from ExxonMobil.

We will begin distributing base oils immediately, a Caltex Australia spokesman said to a reporter. He added that storage and distribution will come from Caltexs Lytton facility in Brisbane, in the state of Queensland. The spokesman did not disclose the capacity reserved to store and supply Chevrons base oils.

Australia is a sophisticated market, with finished lubricants and grease generating an estimated Australian dollars $1.7 billion per year. Finished lubricants are both imported and locally blended. There are some 30 to 40 local blenders, according to industry estimates.

Caltex Australias base oil distribution unit is separate from the Sydney-based businesss own lubricant division, which imports and blends finished products. Caltex is one of the top four suppliers of finished lubricants and greases in the Australian market.