London, 20 April (Argus) — London-listed Indian refiner Essar Energy is considering halting base oil production at its 246,000 b/d Stanlow refinery in the UK, one of only two currently producing base oils in the country.
Essar's review of the base oils production lines at the refinery is part of a strategy to maximise margins and increase the flexibility of the plant's crude intake.
Oversupply of group 1 base oils in Europe has weighed on margins for the products, which are used to make lubricants, the company said. “We have a world-class residue catalytic cracking unit, so it makes sense that the products that are now going into the base oils units could go into higher-margin diesel, petrol and jet fuel instead.”
The company, which bought the refinery from Shell last year, said in February that it was aiming to increase Stanlow's gross refining margin by $2/bl to $4.80/bl by the end of 2013.
Another key concern is that the base oil units hinder the slate of crudes that the refinery can use. Base oils account for just 2pc of Stanlow's output, but they dictate a quarter of the type of crude that it can use.
Stanlow produces about 170,000-180,000 t/yr of base oils, although the plant has a nameplate capacity of 260,000 t/yr. Essar does not have a timeline for when it will decide the fate of base oils production, and emphasised that the units could be restarted if conditions change should they be shut.
The only other base oils production plant in the UK is ExxonMobil's 400,000 t/yr plant at its 310,000 b/d Fawley refinery.
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