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August 19, 2015

Volume 17 Issue 52

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ExMo to Unplug Group I Beaumont Plant

ExxonMobil plans to close the Group I base oil and wax plant at its Beaumont, Texas, refinery by the second quarter of 2016, the company confirmed to Lube Report, citing the global market’s transition to higher performing base stocks.

All impacted employees will be redeployed within the site, the company said in a statement.

The Beaumont plant is the third-largest source of Group I base oil in North America, but analysts said closings like this are inevitable given the current surplus in the market and its trend toward more highly refined stocks.

“The overall base stocks capacity surplus and the surplus of high-performance base stocks add to the pressure on Group I plants to shut down,” Milind Phadke, a director in Parsippany, N.J.-based Kline & Co.’s energy practice, told Lube Report. He explained that Group I demand is declining because engine oil quality levels are rising worldwide and lubricant demand growth is slow.  “With Beaumont’s closure, nearly 15 percent of the North American Group I supply will be shut down.” Lubes’n’Greases’ 2015 Guide to Global Base Oil Refining estimates North American Group I capacity at 75,000 b/d.

Group I now accounts for 25 percent of overall base oil capacity in North America, down from 56 percent in 1998, according to American Fuel & Petrochemical Manufacturers data.

ExxonMobil’s Beaumont plant has 10,000 b/d of Group I capacity, according to AFPM’s 2015 Lubricating Oil and Wax Capacities Report. The association’s report lists Group I capacities of 16,000 b/d at ExxonMobil’s Baton Rouge, La., plant and 9,800 b/d at its plant in Baytown, Texas. In addition, Imperial Oil – which is 69.6 percent owned by ExxonMobil – has a 2,400 b/d Group I plant in Strathcona, Canada.

“We will continue to supply and market Group I lubricant base stocks and associated waxes, which are manufactured at both our Baytown and Baton Rouge refineries in the U.S., as well as other locations worldwide,” ExxonMobil spokesman Christian Flathman told Lube Report.

According to Lubes’n’Greases’ base oil guide, ExxonMobil’s Group I capacity outside of North America includes a 13,000 b/d facility in Singapore, 12,000 b/d at a plant in France, 14,000 b/d at a plant in Italy and 7,800 b/d at a site in the United Kingdom.

“We recently expanded our manufacturing of higher performing base stocks (e.g., Group II and Group II+) at our facilities in Baytown, Texas, and in Singapore and are evaluating a potential investment in Rotterdam to meet growing customer needs,” Flathman said. “Our Beaumont refinery remains an important part of our integrated business model as evidenced by the recent announcement to expand an existing crude unit and downstream treatment units at the Beaumont refinery by approximately 20,000 barrels per day. The ExxonMobil Beaumont lubricant oil blending plant will continue full operations.”

Stephen B. Ames of SBA Consulting, Pepper Pike, Ohio, said he was not at all surprised by ExxonMobil’s decision because the surplus of Group I base oil continues to warrant deeper reductions in Group I plant throughput.

“At some point, it becomes difficult to maintain continuous operations in solvent extraction units that vastly increase the cost of production,” Ames explained, alluding to the fact that Group II and III plants have lower operating costs than Group I facilities. “The surplus likely had a quite profound impact at ExxonMobil as they eschew spot sales. Moreover, the large fuels margins in the U.S. has a great deal of previously base-oil-destined vacuum gas oil going to maximizing fuels cracking.”

Ames noted that the recent increase in Group II capacity at Baytown and Singapore is probably well in excess of Beaumont’s nameplate, let alone that site’s current level of production. “Some of ExxonMobil's Group I customers are likely to have been ‘upgraded’ to that new Group II production,” he said. “The remaining Baton Rouge, Baytown and Strathcona base oil operations have more than sufficient Group I capacity to meet ExxonMobil’s internal and customer needs for all of the Americas.”

Amy Claxton, principal of consultancy My Energy in Hummelstown, Pa., noted that the market for light neutral base stocks with viscosity index of 95 – whether Group I or Group II – is oversupplied globally due to expansions and construction of new plants in recent years.

“The Beaumont facility ceased bright stock production several years ago as part of a streamlining opportunity,” Claxton said. “In today’s robust bright stock market, Beaumont’s lack of bright stock as part of its Group I slate will have reduced their overall Group I plant competitiveness relative to other Group I plants making bright stock along with waxes and heavy neutrals. Given ExxonMobil’s ability to produce Group I stocks at its nearby Baytown and Baton Rouge facilities, it is no surprise that Beaumont would cease its base oil operations, especially in light of upcoming crude changes announced by ExxonMobil for the Beaumont refinery.”

Crude oil refineries routinely assess their product portfolios in light of evolving crude supplies, Claxton observed.

“ExxonMobil announced a crude expansion at its Beaumont refinery to accommodate light shale crudes,” she said. “Shale crudes provide additional economic crude supply for U.S. refineries, but they are not amenable to economic processing for Group I base oil and wax production. Thus, refinery crude slate considerations may have also played a role in the decision, since shale crudes are not paraffinic (in the base oil boiling range), and would not be amenable as feed to any type of base oil processing, regardless of whether it was solvent processing (Group I) or hydroprocessing (Group II/III).”