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Today we have a legislative waste framework which stipulates that waste oil must be collected separately, that waste oils of different characteristics are not mixed together with other waste substances if this impedes their treatment and, more importantly individual member states can apply additional measures including voluntary agreements and economic instruments. A waste hierarchy sets out the order for waste prevention and management. Priority is given to prevention, preparing for re-use and recycling.


For the sector the analytical outcome decides the used oil destination. Those used oils that can be re-refined, should be re-refined. If used oil cannot be re-refined it should be destroyed through combustion or thermal destruction.


Just as the sector does not stand still, so the policy landscape impacting upon the treatment of waste constantly evolves. In the latest draft revision to the Waste Framework Directive currently being considered by the EU Parliament, GEIR the European re-refining association has lobbied hard to include mandatory collection and re-refining targets. However there still remains considerable opposition to these proposals from some lubricant oil producers with vested interest in virgin oil.


For the re-refining sector’s future, a supportive regulatory framework is important for its well-being along with the cost of raw material and the availability of supply of used oil which are also key considerations.


Over the past fifteen years the re-refining sector has made important investments in technology. These investments have been recognised around the industry as leading to improvements in the production process so today re-refining can produce high quality Group II and Group III basestocks. But this comes at a time when the supply of virgin base oil is plentiful.


The announcements of Group I closures has led to a decrease in supply of this base stock of around 3.5 million tonnes a year. The market is moving towards a Group II and Group III future, so that Group I plants are limited in scope in an increasingly synthetic world of finished lubricants. Re-refiners are able to make up this shortfall of Group I+ over the short-term as the market adjusts to a new supply model. For industrial applications


there is still a need for Group I which may come into short supply certainly over the next few years. For the foreseeable future there will also be a need to produce brightstock.


In the future, flexibility in the production of Group I+ and Group II supply will be key to surviving in a constantly evolving market.


Taking GEIR’s proposals to the revised Waste Framework Directive allows us to place some numbers around the potential re-refining market in Europe from a supply side perspective. Across the European Union estimates have put lubricant demand at 4.3m tonnes in 2014, GEIR believes that 2.1m tonnes is potentially collectible with 1.7m tonnes or 80% being realistically collectible in Europe leaving 0.7m tonnes of re-refined used oil. Around 74% of this European Union market is accounted for by the big six countries of Germany, France, Italy, Spain, the United Kingdom and Poland.


Certainly re-refining capacity within Europe is varied. Re-refining plants are planned for the United Kingdom, which has limited existing re-refining capacity, and the Ukraine. Existing plants are already well established across much of Central Europe to be able to meet the increased demand for re-refined oil across all member states.


In North America approximately 743,000 tonnes a year of re-refining capacity is in operation with another 298,000 tonnes of capacity under consideration or development. In addition to this another 215,000 tonnes of re-refining capacity is already in operation and dedicated to producing fuel.


So what of the economics of re-refining? Used oil prices correlate quite closely with the price of virgin crude oil. Today used oil attracts round 50% of the price of crude oil. With a fall in the value of crude oil, and re-refined oil, margins have also come under pressure, falling from around 650 Euros/tonne in January 2014 to around 375 Euros/tonne in the third quarter of 2016.


The higher the price of crude oil the better it is for re-refiners, despite the price of waste oil. Industry analysts expect the oil price to harden between now and 2018, rising to around $57/barrel next year from around $55/barrel this year. This has to be good news for re-refiners. On a simple,


Fabio Dalla Giovanna, Chief Technology Officer, EGEO OIL


LINK www.egeo.pt


cash margin basis, increasing prices allow for greater investments in production efficiencies and technological advances that produce better quality products in a more efficient manner.


Re-refining works differently across different member states. In Italy lubricant manufacturers must join an independent non-profit organisation, COOU, and pay a contribution to meet the costs of collecting used oil. Portugal has already established mandatory collection and re-refining used oil targets, ensuring that 85% of used oil is collected and 50% is regenerated. Like Italy, Portugal has also established an independent non-profit organisation funded by lubricant manufacturer contributions which meet the costs of collecting, storing and pre-treating used oil.


A regulatory framework that encourages investment in re-refining capacity is key to business investment in this sector. In Portugal, EGEO will launch a new plant with a process capacity of 20,000 tonnes a year. Through technological differentiation, EGEO seeks to develop worldwide projects for developing re-refining plants. Taking advantage of the know how and experience of its technical staff, EGEO Oil is looking for partners in suitable locations to design and to install re-refining plants, with the technology and capacity adapted to the local market.


EGEO Oil’s ambition is to establish itself as one of the major players in the treatment and re-refining of used lubricant oils. To achieve this, EGEO Oil aims to apply innovative technology to efficiently upgrade used oils into a high quality base oil and valuable products.


LUBE MAGAZINE NO.140 AUGUST 2017


35


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