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January 21, 2020

Volume 3 Issue 7

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Middle East Rerefining Ripe for Growth

DUBAI, United Arab Emirates – The Middle East may be finally kicking its monograde engine oil dependence, but dealing with the disposal of low-grade used oil could galvanize an increase in rerefining plants across the region, an industry insider said.

As many as 20 rerefining plants are spread across the Middle East, and with the area rapidly approaching an environmental crossroads, pressure is mounting to find a solution to a growing problem. Just one gallon of oil dumped into a waterway can contaminate a million gallons of water, according to an industry executive, and that is sounding alarm bells in a region where peak summer temperatures approach 50 degrees Celsius.

For years the Middle East’s engine oil market was characterized by consumers believing frequent oil changes were an answer for hot and dusty conditions, fueling a regional boom in the use of monogrades. But increasingly stringent regulations in Europe and the United States are driving the take-up of synthetic and semi-synthetic engine oils.

Speaking at the Petrosil Base Oil, Lubricant and Wax conference here last week, Sanjeev Kale, general manager of Mumbai-based Thermopac Process Engineering, said alternatives to disposing of used oil – such as burning – are no longer tenable amid greater environmental scrutiny.

Middle East refiners may also see rerefining as a way to broaden existing business at a time when regional Group I base oils supplies are increasingly erratic. Although Group I plants are closing down around the world, demand remains in major African markets such as Nigeria. A growing scarcity of Group I base stocks stems from tensions between the U.S. and Iran as well as narrowing price differences with Group II base stocks.

As a result, the region has become a major market for Thermopac, Kale said. “We do almost 400 tons per day of used oil in the Middle East and we see huge potential in Africa,” he added.

Kale told delegates that Thermopac’s used oil rerefining technology can recover up to 77 percent of an API Group I base oil in solvent neutral 80, 150, 300 and 400-500 grades, depending on customer requirements. That assumes a typical feed of mixed hydrocarbons containing around 5 percent water, 5-10 percent diesel or kerosene, 5-10 percent light ends such as gasoline or aromatics, 65 percent long-chain hydrocarbons and 5-10 percent residual solids and asphaltenes. The process can remove sulfur to some extent and improve oxidation stability. 

Kale claims the company has already installed 22 plants on five different continents, as Thermopac’s six-stage rerefining process is viewed as an alternative to acid-clay and solvent extraction systems. But plant economics are still important. Conventional clay finishing systems have an operating cost of around U.S. $45-$50 per ton, but Thermopac claims its technology costs just $18 per ton of finished product. Such differences can help improve base oil margins produced from rerefining, particularly for Group I base stocks.

It is a similar story with capital investment, which the company says is lower than for either solvent extraction or hydrotreating technology and does not use hazardous solvents or chemicals in the process. In terms of cost of ownership, Thermopac’s plant capital expenditure accounts for around 30 percent of total expenditure, but Kale said that aligning the right technology with the plant’s civil works is critical for a project to succeed. “If the rerefining plant does not perform, the remaining 70 percent of investment will go for a toss,” he noted. But the overall savings can give a customer a return on investment in just over a year, Kale said.

A solid opportunity for rerefining exists in the Middle East. But the region lacks a cohesive policy regarding the collection and disposal of used oil. Countries including Saudi Arabia and United Arab Emirates have raised the bar, but the wider use of rerefining still looks some way off, and despite environmental pressures, its adoption still appears tied to crude prices.