Lotos nears decision to build new Gdansk base oils unit

Polish government-controlled oil company Grupa Lotos is nearing a decision to add a Group II unit at its 210,000 b/d Gdansk refinery.

The unit would have capacity to produce up to 450,000 t/yr of Group II base oil grades N100, N200 and N600 as well as a heavier grade that could be interchangeable with Group I bright stock. There may also be some production of Group III grades.

This new capacity would be in addition to its 250,000 t/yr Group I unit which produces SN 150, SN150+, SN 500 and bright stock grades for domestic and export markets.

The Polish company is expecting to grant formal approval for the project and sign engineering, procurement and construction (EPC) contracts within two months.

Lotos expects that the new unit will become operational in late 2024 or early 2025. The Polish company said it had already secured financing to start the project.

This Group II unit would represent the second virgin Group II base oil unit in Europe and the only domestic production of a Group II bright stock equivalent. ExxonMobil is currently the only domestic Group II producer, with up to 1mn t/yr nameplate capacity at its Rotterdam refinery.

Demand for more premium Group II base oils is rising as environmental regulations drive the need for higher quality base oils, especially in the automotive sector where engine oil manufacturers are responding to increasing demand for low sulphur, fuel-efficient formulations with longer drain intervals.

Lotos is part of Polish government plans to merge its oil and gas companies under the umbrella of PKN Orlen, operator of its 325,000 b/d refinery. PKN had received European Commission conditional approval to acquire Lotos, but has so far failed to meet merger conditions including the sale of a 30pc stake in the Gdansk refinery to an external investor. Earlier this month Brussels gave PKN nearly four more months to meet the conditions, extending the deadline until 14 November. PKN said yesterday that the extension of the deadline does mean that it had difficulties in meeting conditions, saying the whole process is "70pc advanced". PKN had repeatedly said that the acquisition would improve, rather than restrict, the Gdansk refinery's ability to finance new projects.

By Tomasz Stepien and Catherine Caulfield