Shell has started construction of a Group III base oil production plant at its Wesseling oil refinery in western Germany, with commissioning scheduled by 2028, the company told Argus today.
Two columns of 54 and 37 meters for the base oil conversion unit have been delivered and assembled at the site, Shell said.
It announced plans to convert its Wesseling hydrocracker into a Group III base oil production unit at end of January 2024. The unit is anticipated to have a production capacity of 300,000 t/yr.
Shell will cease crude distillation by March 2025 at the 147,000 b/d Wesseling refinery, as the company looks to reduce CO2 emissions. The base oil plant will receive vacuum gasoil (VGO) feedstocks from Shell's neighbouring 187,000 b/d Godorf refinery.
European Group III prices have dropped on a persistent supply overhang. Argus-assessed prices for fca northwest Europe Group III 4cst with partial or no approvals fell by 23pc on the year to $1,020/t on 7 February.
Suppliers in the Mideast Gulf target European buyers with ample spot supplies to capitalise on higher margins. Europe is the most attractive export outlet as it remains dependent on imports of Group III material owing to its smaller Group III production capacity in comparison to other regions.
