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Re-refining Takes the Limelight

New U.S. based oil re-refineries are popping up all over. Improved rerefining technologies, rising virgin base oil and finished lubricant prices, and Valvoline’s new nationally branded rerefined motor oil are cited as reasons why.

Announced U.S. rerefined base oil projects currently on the anvil include:

• Heritage-Crystal Clean, which plans to build a 2,000 barrel-per-day rerefinery in Indianapolis near its existing operations. Production will begin in mid-2012. This plant will make API Group II based oils, the company says.
• Avista Oil AG, which acquired a 50 percent stake in Universal Environmental Services LLC, enabling UES to grow its used oil collection business and plan a rerefinery in Peachtree City, Ga., to process 30 million gallons of waste oil per year by 2013. In the oil recycling business since 1951, Avista already operates rerefineries in Denmark and Germany that make API Group I base stocks.
• Green View Technologies expects to commission and bring online a re-refinery late this summer in Rollinsford, N.H. It hasn’t released a capacity estimate.
• NexLube Tampa LLC plans next year to begin construction of a rerefinery and lubricant blending plant in Tampa, Fl., with opening targeted for 2013. Expected to process 24 million gallons of used oil annually, the rerefinery anticipates having capacity to produce an estimated 1,100 barrels per day of Group II base oil.

Once open, these and other newcomers will join the landscape of existing U.S. re-refiners, such as Evergreen Oil (1,150 b/d), Heartland Petroleum (1,500 b/d), Universal Lubricants (780 b/d, no relation to UES), and the biggest of them all, Safety-Kleen, with 5,000 b/d at its East Chicago, Ill., location.

The past year has seen significant increases in virgin base oil prices, and posted Group II base oil prices today are 40 to 45 percent higher than in June of 2010. That has allowed rerefined base oils more room to compete against the virgin stuff. Meanwhile, as their raw material costs rose, finished lubricant marketers have implemented three rounds of price hikes this year alone. In each round, prices for most finished lubricants went up from 5 percent to as much as 12 percent and also widened the openings for rerefined base oils.

Milind Phadke, project manager for Kline & Co.’s Energy Practice, sees great scope for re-refining to grow in North America. “Despite Valvoline’s foray, I think this business will be primarily for fleets” rather than individual consumers, Phadke said.“ Re-refiners have a much smaller scale of operations compared to large companies. These large oil companies have difficulty incorporating rerefined base stocks in their blends as the quantity available is very small and not available in all parts on the world.”

For rerefiners, growing beyond a certain size is uneconomical, said Phadke, as the bigger the plant, the bigger the collection radius must be for the used oil and hence the higher the cost. “Some companies like Valvoline do venture in this business, but mainly for the marketing platform.”

He noted that rerefining technology has improved significantly. “With the current generation of hydro-treatment technology, it is possible to produce good quality base stocks, often borderline or even better Group II type base stocks,” Phadke said. “Also, as the share of virgin Group II and Group III base stocks in mainstream products increases, the quality of used oil obtained, and that of the rerefined base stocks, has also improved.”

According to Phadke, the growth in finished lubricant prices, driven by high base stock prices and quality upgrades (such as the move from API CI-4 to CJ-4 heavy-duty motor oils), along with the low value obtained for the used oil, means a purely economic case can be made for rerefining.

Valvoline launched its NextGen motor oils earlier this year. Made with 50 percent re-refined base oil, the line includes conventional, synthetic blend and high mileage formulations, including some which meet API SN and ILSAC GF-5 standards. All are backed by the same 300,000-mile engine protection guarantee that the company’s virgin oil based products offer.

Valvoline may be big, but it’s by no means the first to plow this field, pointed out Tom Morley, president of The Lube Stop. His Cleveland-based firm was the first in the United States to trademark a rerefined oil change service, called EcoGuard, offering it across its 37 stores in May 2008; it immediately became 10 percent of sales, he told Lubes’n’Greases, and today represents almost 60 percent of the changes Lube Stop performs. Others, such as Safety-Kleen, North American Lubricants and Universal Lubricants, have branded re-refined motor oils, but Lube Stop branded the service itself, and currently earns a $2 premium each time a customer chooses this option.

Being in Ohio gives The Lube Stop ready access to the Heartland re-refinery in Columbus, both as a destination for its waste oil and as its base oil supplier. “The key,” Morley explained, “is to be within operable range of a rerefinery. We now have a closed-loop product supply, where our waste oil goes to Heartland, and the rerefined base oil is made into motor oil by a lube blender who is near us, there’s more than one, and then comes back to our stores.”

Morley said a recent survey by National Oil & Lube News found 22 percent of quick-lube outlets in 2010 offered a re-refined oil change, and that was before Valvoline Instant Oil Change with its 850 stores jumped aboard.

“If Valvoline is successful, others such as Shell and BP are sure to become fast followers, similar to ‘high mileage’ lubricants a few years ago,” Stephen Ames, principal of SBA Consulting, Pepper Pike, Ohio, commented. “With that, a very robust requirement for high quality rerefined base oils will develop, possible more than the marketplace can produce,” Ames said. “One can derive a substantially greater value for the waste oil if upgraded to base oil and especially Group II quality should the Valvoline ‘eco’ marketing program be successful. This is the principal driver behind the recent announcements of new rerefining capacity in North America.”