In a strategic bid to help meet increasing demand for lubricants in the Asia Pacific, Shell Petroleum and Hyundai Oilbank have joined forces to construct a new base oil manufacturing plant in Daesan, South Korea.

Base oils are the key component of finished lubricant products, making the plant instrumental in stepping up lubricant supply across the region, including China.

Commissioning, start-up and operation of the plant will be managed by a joint venture between the two companies, with the plant expected to be fully operational in the second half of 2014, producing up to 650,000 tonnes of API Group II base oils each year.

The new plant is at Hyundai’s refinery in Daesan, which is close to key lubricants markets and has strong infrastructure. While it is Hyundai’s first foray into base oil production, it will be Shell’s fourth base oil manufacturing plant in the region, alongside 19 lubricant blending plants. Shell recently announced its intention to build two more blending plants in China and Indonesia.

Shell Global Commercial’s executive vice president Mark Gainsborough says the plant is being built in response to an expected growth in high quality lubricant demand in the region, driven by new vehicle ownership and production, construction and industrial activity, particularly in the power generation and oil and gas production sectors.

“We are pleased to enter this joint venture with Hyundai Oilbank. It is a partnership that recognizes Shell’s strengths in base oil technologies, and our leadership position in lubricants blending and marketing. In Hyundai Oil Bank we have found a worthy partner. Its world-class refinery facilities combined with its project management expertise are a great fit with Shell’s lubricants business,” he says.

The Asia Pacific region is driving global growth in lubricants demand. By 2020 it is estimated the region will represent more than 50% of all demand.

The 60:40 joint venture will concentrate on manufacturing base oils, which once produced, are blended with additives to create the finished lubricant. Commercial agreements have been negotiated which will see Shell taking some of the base oil to create high-quality finished lubricants at its blending plants around the region.

Shell’s wide variety of lubricants are used across a range of applications in motoring, heavy-duty transport, power generation and engineering.

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