Royal Dutch Shell

Shell to raise lubricant capacity by 50pc with giant Guangdong plant

PUBLISHED : Saturday, 23 June, 2007, 12:00am
UPDATED : Saturday, 23 June, 2007, 12:00am

Energy giant Royal Dutch/Shell plans to increase its lubricant production capacity on the mainland by 50 per cent by building in Guangdong one of its three largest lubricant blending plants globally.

The plant in Zhuhai will have a capacity in the first phase of development to make 200,000 tonnes annually of consumer, transport, industrial and marine lubricants and engine oils.

It will be completed late next year and be ready for commercial operation early 2009.

Second-phase expansion will double capacity to 400,000 tonnes. No timetable has been disclosed.

The plan comes after Shell, the world's second-largest supplier of lubricant, tripled its share of the mainland lubricant market in September last year to 9.5 per cent, by buying a 75 per cent stake in Beijing Tongyi Petroleum Chemical and Xianyang Tongyi Petroleum Chemical for an undisclosed sum.

Shell originally had 200,000 tonnes of annual capacity and the two Tongyi units have a combined 600,000 tonnes in three blending plants.

The Zhuhai plant would produce both Shell and Tongyi brands of lubricants in equal volume, Shell said.

After the acquisition, Shell became the third-largest seller of lubricants on the mainland after state-owned PetroChina and China Petroleum & Chemical Corp (Sinopec).

A Shell spokesman declined to give the Zhuhai plant's investment

'It is a significant investment for Shell lubricants in China and globally. Upon establishment, it would be one of the top three plants for Shell lubricants globally,' he said.

A 27,000 tonne-a-year lubricant plant started up in November last year in Xiaohu Island, Guangzhou, by Nippon Oil - Japan's largest oil refiner by capacity - cost US$17 million to build.

The mainland was estimated to have five million tonnes of lubricant sales this year, 12 per cent of the global total, while still about 50 per cent of the size of the United States' market, Shell's executive vice-president responsible for lubricant production and sales, David Pirret, said last year.

The mainland is the world's fastest-growing consumer lubricants market, forecast to grow annually by 10 per cent at least until 2010, he said.

Car sales, a main driver of lubricant sales, grew 21 per cent year on year to 2.57 million units in this year's first five months.

Tongyi was Shell's second major acquisition in downstream operations on the mainland last year, after the purchase of Hong Kong-based Koch Materials China in March to raise its bitumen output capacity to 6,600 tonnes from 2,400 tonnes a day.