8 December 2010

New Gp III Capacity Coming Up

Written by Ulla Kotila
Published in Oil products

The start up of the Bahrain production unit is getting closer. When on stream, the lube base oil plant will produce 400kt of high quality NEXBASE® base oils. It will be mechanically completed soon after the turn of the year and the unit will be in production in Q3 2011. It will increase the NEXBASE® capacity from the current 250kt/a to 650kt/a.

It has taken a while to get here. Some may even have doubts of this day never to arrive. The negotiations with the JV partner Bapco started years ago, the EPC was awarded in 2008 and the construction work started in January 2009. The lube base oil plant is a joint venture between Neste Oil and Bapco and it is situated within Bapco’s existing refinery utilizing the existing refinery infrastructure.

Much has happened during the years – the latest and also the biggest challenge inevitably being the financial crises that has severely impacted the lubricant market and OEM’s worldwide, not to mention the many households in these regions. Fortunately, some recovery in the market can be seen, yet the recovery seems to be a bit wavering. Although the lubricant demand has been picking up in Europe and US this year the demand has not been projected to rebound to reach the top levels in the next few years. Nevertheless, the Asian Pacific market seems to be the driving force for the lubricant consumption; the financial crises didn’t impact China and India as severely as the Western world and the recovery seems to be more rapid as well. The car sales in China have been climbing steadily and China has overtaken US as biggest car market in the world. They expect the lubricant demand to rise to 6.5 million tons this year and to reach 8.3 million tons in 2015.

The Group III base oil demand, however, has been strong and we are glad to see a growing market for high quality base oils. Currently the European market is short on Group III and as the economy keeps on recovering the demand is expected to grow even more. We believe our new Group III capacity in the Middle East will help to ease the current tightness. It will be interesting also to see what will happen in the emerging economies, as that is where the biggest growth potential is for the high quality base oils.

We have started this new column section at our web pages called Neste Oil Observations where you can read what is going on at Neste Oil and what our thoughts are of today’s markets. If interested, you can also read a news report concerning the safety milestone reached at the Bahrain Unit construction site and see fresh pictures of the plant from our news section.

Ulla Kotila
Market Development Specialist, Base Oils