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Shell, HDO to construct new base oil plant

15th January 2013

Shell and Hyundai Oilbank to build new base oil manufacturing plant in South Korea

Shell, HDO to construct new base oil plant
Once fully operational in the second half of 2014, the plant will produce 650kt of API Group II base oils a year

Shell Petroleum Company Limited (Shell) and Hyundai Oilbank (HDO) on Tuesday confirmed their intention to construct a new base oil manufacturing plant (BOMP) in Daesan, South Korea.

Base oils are the key component of finished lubricant product, making up on average 60-80 per cent of the end products. This plant will therefore significantly increase lubricant supply across the region, including China.

Commissioning, start-up and operation of the plant will be managed by a joint venture between the two companies; Hyundai and Shell Base Oil Co., Ltd (HSB). Once fully operational in the second half of 2014, the plant will produce 650kt of API Group II base oils a year. A formal ground breaking ceremony to mark the start of this cooperation will take place at the refinery on Tuesday 22 January.

Located at HDO's refinery in Daesan, this location is close to key lubricants markets and has strong infrastructure. This will be Shell's fourth BOMP in the region, which works alongside 19 lubricant blending plants. Shell recently announced its intention to build two more blending plants in China and Indonesia.
This plant is being built in response to an expected growth in high quality lubricant demand in the East, driven by new vehicle ownership and production, construction and industrial activity -- especially in the power generation and oil and gas production sectors.

"We are pleased to enter into this joint venture with HDO," said Mark Gainsborough EVP, Shell Global Commercial. "It is a partnership that recognizes Shell's strengths in base oil technologies, and our leadership position in lubricants blending and marketing. In Hyundai Oil Bank we have found a worthy partner. Its world class refinery facilities combined with its project management expertises are a great fit with Shell's lubricants business."

For the moment the joint venture (60 per cent owned by HDO, 40 per cent by Shell) will concentrate on manufacturing base oils. Like crude oil, base-oils are also traded on the open market. Commercial agreements have been put in place with Shell taking some of the base oil and using it to create high quality finished lubricants at its blending plants around the region.