The European production base for lube base oil, Spain's iLBOC plant, is unveiled to the media for the first time.
Attention to a stable supply chain that reduces dependence on the Middle East... Market share expected to increase
(Cartagena [Spain] = Yonhap News) Correspondent Kyeong-rak Min = "The company's name is 'iLBOC'. In Korean, it is a company with a lot of work and many benefits."
As Lee Tae-hoon, head of the Ilbok factory, jokingly introduced, he said that the Spanish Ilbok factory has recently been inundated with love calls from lubricant manufacturers around the world inquiring about contracts. As the supply of lube base oil from Qatar was severely disrupted due to the Middle East crisis, K-lube base oil produced in Europe emerged as a substitute.
The uniform factory in Cartagena, a city on the Mediterranean coast of Spain, which was first revealed to the media on the 14th, looked like a huge island of Pipe. The intricately intertwined appearance of large and small pipes reminded me of a large, tightly woven three-dimensional maze. It was said that these large pipelines were copied from the Ulsan plant, which has the know-how to produce high-quality lubricant base oil. In 1995, SK Enmove's Ulsan plant succeeded in mass commercializing high-quality lubricant base oil using remaining oil (unconverted oil) after refining for the first time in the world. SK Nmove is the world's No. 1 company in terms of high-quality (Group 3) lube base oil production capacity.
As all work was automated, it was difficult to find people inside the factory. Throughout the tour of the facility, the heavy and dull sound of machinery operating continued, followed by the sticky smell of oil.
Ilbok Factory, established in 2014, is a joint venture with SK Enmove and Spanish oil company Repsol with 70% and 30% shares, respectively. Ilbok extracts high-quality lubricant base oil from unconverted oil from Repsol's oil refining complex in the same way as SK Enmove's Ulsan plant.
The reason SK Nmove located its production base in Europe rather than the Middle East, where crude oil is easy to procure, was with Europe's strict environmental regulations in mind. This is because in order to meet high regulatory standards, there is bound to be a large demand for high-quality lubricants. This is how the joint model of SK Enmove's unrivaled lube base oil manufacturing technology and Repsol's oil refinery complex infrastructure close to the European market was born.
Ilbok, which has grown steadily since its establishment, accelerated its growth in February of this year as the Middle East crisis escalated due to the U.S. attack on Iran. As oil prices rise, export prices rise. Ilbok's good news became the number one contributor to SK Nmove's second quarter operating profit (KRW 691.9 billion), which soared by a whopping 414% compared to a year ago. Some securities firms predict that operating profit in the third quarter will reach a record high of about 1 trillion won.
What is more encouraging than operating profit is the possibility of mid- to long-term supply chain reorganization.
Automotive and machine lubricants are made by mixing additives with base oil, and it is said that one to two years of research is needed just to determine the appropriate mixing ratio of base oil and additives. In other words, once the main lubricant base oil is selected, it is difficult to change it easily.
However, Ilbok pointed out that as the recent unrest in areas such as Hormuz and the Red Sea has increased, a movement to completely break away from the Middle East supply chain has been detected among its customers. The Middle East crisis itself could be a long-term positive factor for K-lube base oil.
Most of Repsol's crude oil, which is the raw material for producing Ilbok lube base oil, is procured from the Americas and North Africa, so the dependence on products from the Middle East is very low. The ability to provide stable supply without being affected by the Middle East situation, where conflict continues, is a competitive edge that partners seeking mid- to long-term contracts pay attention to.
Moon Pil-gyu, head of SK Nmove's European branch, said, "Lubricant base oils are often contracted after developing their own mixing ratios over a long period of time, so the contract period is long and it is difficult to change easily. I believe the movement to secure a stable supply of lubricating base oils has already begun."
SK N Move said it is minimizing supply uncertainty by organically operating global production bases such as Ilbok in Spain and Dumai in Indonesia, focusing on its Ulsan plant in Korea. The production capacity is 80,300 barrels per day, or 4.66 billion liters per year, which is enough to fill five Olympic-size swimming pools every day.
Among them, the Ilbok plant is the single largest production plant for Group 3 high-quality lube base oil in all of Europe. It was said that the factory's automatic process has never stopped due to internal problems. This means that the technical completeness of the lube base oil production process is high and stable.
The lube base oil produced at the Ilbok plant is transported through pipes to a port about 4km away from the plant and shipped. It was said that cargo ships can dock at this port 365 days a year. Inside the dock's storage tank site, surrounded by high barbed wire, a tank lorry was busy filling lubricant base oil. Behind the tank lorry, 16 storage tanks measuring up to 28 meters were lined up, creating a spectacular sight. It was said that only 5% of the completed lube base oil is shipped by tanker and the rest is supplied by ship.
Some predict that the lubricant base oil market will shrink as the production of electric vehicles has recently increased, but SK Nmove predicts that demand for high-quality lube base oil will increase for the time being as new demand arises from lubricants for electric vehicles and data centers.
CEO Moon Pil-gyu said, “In line with the era of automobile electrification, we are pioneering areas that require lubricant base oil, such as lubricants for electric vehicles and cooling and heat dissipation systems in data centers.”
