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October 5, 2016

Volume 17 Issue 52

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Russian Base Oil, Slack Wax Exports Rebound

WARSAW – Russian base oil and slack wax exports are expected to rebound in 2016, driven by lower logistics costs, lower export duties and calm base oil market conditions, an industry insider said.

Between 2010 and 2015, base oil exports from the country fell 35 percent to 940,000 metric tons thanks to a sour economy and international trade sanctions, Denis Varaksin, base oil and slack wax sales manager at the Berlin-based DYM Resources, told an industry event recently.

“The volumes dropped 35 percent since 2010, and despite the rebound in 2013, Russia lost presence in such markets as Southeast Asia, India and the United Arab Emirates,” Varaksin told the ACI European Base Oils and Lubricants conference held in Warsaw, Poland, last month.

DYM found that primary reasons for such a dramatic slump were lower demand from export markets and strong domestic demand due to a government policy that encourages Russian companies to replace imported raw materials with Russian materials. Also, Lukoil, Russia’s largest base oil exporter, was hampered by production problems at its Perm refinery, site of one of its base oil plants, and closing of its 230,000 t/y API Group I Nizhny Novgorod base oil unit in March 2015.

However, Varaksin predicted that Russian base oil overseas shipments will rise to 1.05 million tons in 2016 as domestic Group II and Group III production increase.

Taneco, a subsidiary of oil major Tatneft that operates a two-year-old  190,000 t/y Group II and Group III plant, boosted its base oil exports to 30,000 tons in the first half of 2016. “The plant now churns 2.5 centiStoke Group II and 4 cSt Group III products. The latter has high quality with water white color and 130+ viscosity index. The plant is getting ready to reach 6 cSt production very soon,” Varaksin revealed, adding that Taneco has registered its products under REACH, the European Community’s chemicals safety legislation, and already exports them to the region.

The completion of one other Group III project is on the horizon in Russia. Slavneft plans to stream a 100,000 t/y Group III upgrade at its Yaroslavl plant in 2017. Other refiners, including Lukoil, Gazprom and Rosneft, have pushed back base oil modernization plans by three to five years.

In 2015 Russia exported 88,540 tons of paraffin slack wax, and these shipments are expected to increase to over 100,000 tons in 2016, according to Varaksin. “In the first half of 2016, Russian slack wax exports reached 52,500 tons, Poland being the largest [destination], with over 60 percent,” he said. Other important export destinations for the Russian slack wax are Lithuania, Germany, Belarus and Belgium.

DYM predicted Russian base oil exports will stay above 1 million tons in 2017, and that the Group II and Group III share of exports will rise as high as 20 percent by the second half of 2017. “We are also expecting the restart of Nizhnekamskneftekhim’s polyalphaolefin plant in Nizhnekamsk and the first Russian exported volumes of PAO in a decade,” Varaksin said.

He added, “Russia’s export duty could continue to decrease from 40 percent to 30 percent of the current crude oil export duty, and that could be an additional drive to support exports.”