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July 19, 2019

Volume 7 Issue 3

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Indian Oil Aims to Make Group III by 2022

Indian Oil Corp. Ltd. expects to commission in 2022 a 270,000 metric tons per year base oil plant that will mostly produce API Group III stocks at its Haldia Refinery in West Bengal.

The capital expenditure for the project, which received Stage-1 approval in August 2017, is estimated to be Rs 1,100 crore (Rs 11 billion or U.S. $160 million), a spokesperson for the Indian government-owned company told Lube Report in an email interview.

“The scheduled commissioning is expected by November 2022, but efforts shall also be made to complete the project within 48 months by undertaking parallel dismantling of existing units,” she said.

India for years was a relatively low quality finished lubricant market that used scant amounts of Group III base oils, but Indian Oil’s move to add Group III production comes as analysts project the market will increasingly shift toward better quality lubricants.

“Worldwide, major players in the vehicle engine manufacturers have claimed marked improvement in engine performance by usage of Group II and III lube base oils. Hence, it may be stated that the shift towards augmentation of Group II and III lube base oils has become the need of the hour,” the spokesperson said.

The market for high quality base oils and synthetics in India is expected to expand as automakers strive to meet tougher vehicular emissions caps and develop technologies for fuel economy. India plans to jump from the current Bharat Stage IV emissions standard directly to BS VI in April 2020, skipping the BS V phase altogether to tackle the nation’s worsening air pollution. BS VI is equivalent to the European Union’s Euro 6 standard and is expected to force engine design changes that require more advanced engine oils.

“Consequent to stricter emission requirements and fuel economy, the market is moving over to low-viscosity oils, which require Group III oils, for which demand is increasing,” the spokesperson said, adding that various semi-synthetic and synthetic lubricant oils can be manufactured with Group III specifications.

She said India’s current annual base oil demand is 3.3 million tons, compared to indigenous production capacity of about 1.3 million tons, leading to the country’s substantial reliance on imported base oils. India imports base oils from many countries to meet its requirements, including South Korea, Singapore, Saudi Arabia, the United States, Spain, the United Arab Emirates, Bahrain and Iran.

Indian Oil, which markets lubricants under the Servo brand, said demand for Group II and III base oils in the country are substantially increasing, while demand for Group I is falling. The company projected India’s lube oil base stocks demand to grow to 3.5 million tons by 2021-22. “Hence, augmentation of [lube oil base stocks] production is required,” the spokesperson said.

“The driving factor behind this [Indian Oil’s Group III production plan] is clearly migration to BS VI in April 2020,” said Shailendra Gokhale, managing partner of Mumbai-based Rosefield DAA International Consultancy LLP. He also predicted, however, that Group III from Haldia will only be available in 2023.

Chevron Lummus Global, a joint venture between Chevron U.S.A. Inc. and McDermott, said it has received license and engineering contracts to provide wax isomerization and hydrofinishing technologies, which are licensed under the Isodewaxing and Isofinishing brand names, for the project. The plant will be designed to process unconverted oil from a hydrocracking unit in the broader Haldia fuels refinery, it added.

The Haldia refinery’s existing base oil plant has capacity to make about 130,000 t/y of Group I and 120,000 t/y of Group II, according to Lubes’n’Greases’ 2019 Guide to Global Base Oil Refining.

The only existing Group III production in India is at Hindustan Petroleum’s Mumbai base oil plant, which has about 24,000 t/y Group III production capacity.