Saudi Aramco Base Oil’s planned expansion of its Yanbu base oils facility includes the capability to increase production of Group III base oils sharply depending on market demand.The plan is part of the growth expansion of its Yanbu facility, with Group III base oils production set to start in 2025.The project targets total production capacity of around 1.3mn t/yr of base oils at the Yanbu facility in 2025.The capacity would consist of 270,000 t/yr of Group I base oils, 815,000 t/yr of Group II base oils and 175,000 t/yr of Group III base oils, Saudi Aramco Base Oil said in its initial public offering (IPO) prospectus.Saudi Aramco Base Oil is also known as Luberef.Luberef is selling as much as 29.7pc of the company through the IPO..Saudi Aramco Base Oil proceeds with IPO.Luberef’s current total production capacity of 1.3mn t/yr consists mostly of Group II base oils at Yanbu, as well as 275,000 t/yr of Group I base oils at Jeddah.The flexibility to adjust production of Group II and Group III base oils at Yanbu would allow for production of as much as 1.12mn t/yr of Group II base oils, with no Group III base oils.Alternatively, it would allow for production of 670,000 t/yr of Group III base oils, with no Group II production.Luberef’s board approved the final investment decision for the expansion earlier this year. The investment is expected to amount to $150mn-200mn.The project entails increasing the capacity of the Yanbu plant’s vacuum distillation unit (VDU) to 65,000 b/d. Luberef already increased capacity of the VDU to 45,000 b/d in 2021 from 40,000 b/d, and to 46,000 b/d this year.The plan entails expansion of the refinery's hydrocracker to 35,000 b/d from 26,000 b/d, and expansion and optimisation of the iso de-waxing unit to 29,000 b/d from 19,000 b/d.Global Group III base oils prices maintained a steep premium to Group I and Group II prices over the past year in response to steady supply and rising demand.Other refiners also have the capacity to produce Group III base oils instead of Group II base oils. The move entails a significant drop in the output yield.The move is attractive when the premium of Group III base oils over Group II base oils prices is wide enough to more than make up for the drop in the output yield..Saudi Aramco Base Oil targets as much as $1.32bn from IPO
