Total's decision not to restart base oils production at its 240,000 b/d Gonfreville refinery in France is a blow to lubricant blenders struggling to maintain operations amid severe and persistent supply shortages.
The Group I base oils unit at Gonfreville had been expected to resume operations this summer, after a fire halted much of the refinery's operations over a year ago. And some blenders were anticipating offers of Group I base oils from Total in September. But France's GCT union told Argus yesterday that although Total plans to resume crude processing at the refinery in May, the base oils unit will not restart. The company has confirmed this, saying that its decision to stop base oils production is related to "a structural decline in demand". Management is working with unions to define a framework to support redeployment of personnel affected.
The closure will also impact production of paraffin and microcrystalline waxes as by-products of Group I base oils production are used as feedstock for waxes. Europe is the largest Group I producing region, but a reduction in refinery run rates since the onset of the Covid-19 pandemic in the region last year and a raft of overlapping maintenance shutdowns in the first half of this year have tightened supply significantly, leading to a surge in prices for all Group I grades in domestic and export markets. Bright stock and SN500 prices have reached their highest levels in the nine years, with the latest weekly European domestic bright stock prices hitting $1,545/t, up from just $525/t in the final week of May last year.
Production of Group I base oils from Gonfreville stopped in December 2019 after a fire damaged the refinery's crude distillation unit. Vacuum gasoil (VGO) procured from the market was prioritised for fuel production over base oils. Regional buyers of base oils have since covered demand from alternative sources, including other producers in northwest Europe, refineries in the Mediterranean and Russian suppliers.
Total is not alone is stopping Group I production. Portuguese firm Galp aims to permanently shut the 180,000 t/yr Group I unit at its 110,000 b/d Porto refinery as early as April. The closures are the first in Europe since 2016. Other closures have been announced in Latin America and Asia-Pacific.
The Group I unit at Gonfreville produced base oil grades SN150, SN500 and bright stock. Prior to the closure in 2019, it offered these grades by truck to domestic customers and regularly offered cargoes of bright stock in the export market.
