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Which margin levers impact Group I and Group II base stock competitiveness? Part 1

06.01.2014  |  Moncrieff, I.,  Kline and Co., Inc., Parsippany, New Jersey

Keywords: [margin lever] [base stock] [lube oil] [Group I] [Group II] [refinery] [cash margins] [Kline]

As much as the lubricants industry might wish it otherwise, base stocks production is becoming more commoditized, and it is intertwined inextricably with mainstream refining operations. The vast majority of base stock production occurs in “lube blocks,” which are integrated, both physically and commercially, with their co-located parent fuels refineries. It’s possible to draw an imaginary fence that defines the lube block, separating it conceptually from mainstream refining. Into the lube block may flow a variety of feedstocks (primarily vacuum gasoil (VGO), but also hydrocracker bottoms, vacuum tower bottoms and hydrogen) while intermediate streams not sold directly from the lube block to third parties are returned across the “fence” to the parent refinery, for pool blending or conversion in fluid catalytic cracking (FCC) or coking units.

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