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Released March 03, 2025 | GALWAY, IRELAND
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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Construction has begun on a major Group III base oil production facility at Shell plc's (NYSE:SHEL) (London, England) Wesseling oil refinery in western Germany.
The move follows through on a decision made by the company last year to shut down its oil refinery operation at the 147,000-barrel-per-day (BBL/d) Wesseling refinery, which forms part of Energy and Chemicals Park Rheinland. At the time Shell said the move would help it cut Scope 1 and 2 carbon emissions by around 620,000 tonnes a year and play a key part in it becoming a net-zero emissions energy business by 2050. Industrial Info has been tracking the conversion of the site's hydrocracker unit into a production unit for Group III base oils - mainly engine and transmission oils. With a start-up date of 2027, the plant will have a production capacity of about 300,000 tonnes a year. The demand for base oils is around 700,000 tonnes in Germany and more than 3 million tonnes in Europe, according to Shell's estimates, and the new plant - which will be the largest in Germany - will be able to cover around 9% of current European Union (EU) demand and 40% of Germany's demand.
Two columns measuring 54 meters and 37 meters, respectively, have been delivered and assembled onsite for the base oil conversion unit. The company has previously announced that it would stop crude processing at Wesseling by 2025. Gasoil, or red diesel, for the plant's base oil operation will be supplied by the company's neighbouring 187,000 BBL/d Godorf refinery. The project will also use an "innovative electric heater (E-Heater)" that will be powered by renewable electricity, which Shell claimed is a first for the petrochemical industry. Amu Arenja, senior project mfor the R3 base oil project, commented: "Such a logistical and organizational feat only works when many people work hand in hand, from our internal operations to partner companies to emergency management and the plant fire brigade. I am very proud that everyone pulled together to achieve our common goal. We have taken a significant step towards completing the plant without complications and on schedule - and now we are moving on to the next work packages so that the base oil plant can start operations as planned." Shell has stated it expects the market for "high-quality engine and transmission oils, as well as e-fluids and cooling fluids, some of which are made from these base oils, is expected to grow." The company has also constructed a 10-megawatt (MW) electrolyser to produce renewable hydrogen and a biomethane liquefaction plant at the Energy and Chemicals Park Rheinland. Industrial Info is also tracking plans for a much larger, 100-MW renewable proton-exchange membrane (PEM) hydrogen electrolyser at the park. Dubbed REFHYNE II, it will use renewable electricity to produce up to 44,000 kilograms per day of renewable hydrogen to partially decarbonise site operations. The electrolyser is scheduled to begin operating in 2027.
The European Group III base oil sector has been suffering from weak prices and oversupply for the past year and this is expected to continue in 2025, with prices falling further, according to commodity tracker Argus. "European Group III spot prices with varying approvals face downward pressure as overseas producers target European buyers supported by attractive margins and ample spot supplies. Europe remains the most attractive export outlet owing to smaller Group III production capacity in comparison to other regions. Europe has an estimated nameplate base oil capacity of 7 million tonnes per year of which 13% is Group III." Although Wesseling is coming, and will be capable of supplying just under 10% of EU demand, Argus said: "Production is only anticipated to begin in 2026-2028, leaving European buyers mostly dependent on imports in 2025."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
The move follows through on a decision made by the company last year to shut down its oil refinery operation at the 147,000-barrel-per-day (BBL/d) Wesseling refinery, which forms part of Energy and Chemicals Park Rheinland. At the time Shell said the move would help it cut Scope 1 and 2 carbon emissions by around 620,000 tonnes a year and play a key part in it becoming a net-zero emissions energy business by 2050. Industrial Info has been tracking the conversion of the site's hydrocracker unit into a production unit for Group III base oils - mainly engine and transmission oils. With a start-up date of 2027, the plant will have a production capacity of about 300,000 tonnes a year. The demand for base oils is around 700,000 tonnes in Germany and more than 3 million tonnes in Europe, according to Shell's estimates, and the new plant - which will be the largest in Germany - will be able to cover around 9% of current European Union (EU) demand and 40% of Germany's demand.
Two columns measuring 54 meters and 37 meters, respectively, have been delivered and assembled onsite for the base oil conversion unit. The company has previously announced that it would stop crude processing at Wesseling by 2025. Gasoil, or red diesel, for the plant's base oil operation will be supplied by the company's neighbouring 187,000 BBL/d Godorf refinery. The project will also use an "innovative electric heater (E-Heater)" that will be powered by renewable electricity, which Shell claimed is a first for the petrochemical industry. Amu Arenja, senior project mfor the R3 base oil project, commented: "Such a logistical and organizational feat only works when many people work hand in hand, from our internal operations to partner companies to emergency management and the plant fire brigade. I am very proud that everyone pulled together to achieve our common goal. We have taken a significant step towards completing the plant without complications and on schedule - and now we are moving on to the next work packages so that the base oil plant can start operations as planned." Shell has stated it expects the market for "high-quality engine and transmission oils, as well as e-fluids and cooling fluids, some of which are made from these base oils, is expected to grow." The company has also constructed a 10-megawatt (MW) electrolyser to produce renewable hydrogen and a biomethane liquefaction plant at the Energy and Chemicals Park Rheinland. Industrial Info is also tracking plans for a much larger, 100-MW renewable proton-exchange membrane (PEM) hydrogen electrolyser at the park. Dubbed REFHYNE II, it will use renewable electricity to produce up to 44,000 kilograms per day of renewable hydrogen to partially decarbonise site operations. The electrolyser is scheduled to begin operating in 2027.
The European Group III base oil sector has been suffering from weak prices and oversupply for the past year and this is expected to continue in 2025, with prices falling further, according to commodity tracker Argus. "European Group III spot prices with varying approvals face downward pressure as overseas producers target European buyers supported by attractive margins and ample spot supplies. Europe remains the most attractive export outlet owing to smaller Group III production capacity in comparison to other regions. Europe has an estimated nameplate base oil capacity of 7 million tonnes per year of which 13% is Group III." Although Wesseling is coming, and will be capable of supplying just under 10% of EU demand, Argus said: "Production is only anticipated to begin in 2026-2028, leaving European buyers mostly dependent on imports in 2025."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
