Chevron’s $1.4 billion base oil facility comes online in Mississippi

HOUSTON — Chevron Corp. has begun production at a new $1.4 billion premium base oil facility at its Pascagoula, Miss. refinery, the company announced Monday, marking the launch of the project after more than six years of development.

Base oil is used to make motor oil for vehicles as well as lubricants and greases for industrial equipment.

“Lubricants are a high growth business supporting economic development worldwide,” said Mike Wirth, executive vice president, Chevron Downstream & Chemicals, in a statement. “The addition of the Pascagoula plant to Chevron’s base oil network enhances Chevron’s reputation as a reliable and flexible base oil supplier globally.”

The company already manufactures premium base oil at its refineries in Richmond, Calif. and South Korea.

Chevron’s new facility, as well as those two existing ones, produce what’s known as  group II or premium base oil, which has less sulfur content and higher viscosity than group I base oil.

“It allows you to provide a … higher quality  base oil for more demanding engines,” said Carey Knuth, general manager of global base oils for Chevron.

Knuth said the company pursued the project because it sees the demand for all base oils growing — especially due to rapid growth in Asia and especially China. But he said demand for group II base oil in particular is growing as it replaces demand for group I base oil as engines and other machinery become more complex.

“Group I base oil won’t meet the demand of new automobiles,” Knuth said in an interview with FuelFix. “We’re replacing group 1 demand, and we’re growing with the overall market demand.”

The project increases Chevron’s capacity to produce base oils by more than 70 percent and will make it the largest premium base oil producer in the world, company executives said in a conference call with analysts last month. The facility will be capable of producing 25,000 barrels of premium base oil per day, officials said.

Chevron submitted its environmental permit applications for the project to Mississippi officials in 2008 and made the final investment decision on the project in January 2011, according to filings with the U.S. Securities and Exchange Commission.

The base oil produced at Pascagoula will supply customers on the East Coast of the U.S. as well as Europe and Latin America. The Korean facility will serve Asia, and the Richmond plant will supply the West Coast of the U.S. as well as Asia.