Hydrodec in Essar Oil deal to create UK oil re-refining centre Hydrodec Plant

Hydrodec Group plc has reached heads of terms on an agreement with Essar Oil UK Ltd to develop re-refining opportunities in the UK as a joint venture.

The arrangement involves the combination of the existing infrastructure, expertise and operating capability of Essar with Hydrodec''s proprietary technology and feedstock from Hydrodec''s UK subsidiary OSS Group to create a leading European oil re-refining centre at Essar Oil’s Stanlow refinery, the second largest in the UK.

Two discrete re-refining operations are envisaged, initially for transformer oil and subsequently for general used oil, with a potential combined capacity of up to around 130 million litres per annum and potential revenues of approximately US $150 million per annum at attractive rates of return.

The collaboration will be conducted in three phases:

establishing a transformer oil re-refining business utilising Hydrodec''s existing technology
developing Hydrodec''s new lubricants technology through a pilot plant stage
establishing a general used lubricant re-refining business deploying the new lubricants technology

Hydrodec intends to establish a transformer oil re-refining business which is capable of processing around 27 million litres of new, branded SUPERFINETM transformer oil from used transformer oil. 

Hydrodec considers it likely that this be established in two stages with an initial two train processing facility commissioned by end 2014 drawing used oil feedstock from within the UK and imported from other countries such as the US and Continental Europe.

As an initial step, Hydrodec and Essar will consider importing SUPERFINETM for sale in the UK which Hydrodec currently manufactures in the US.

With Essar''s assistance, Hydrodec is likely to establish the lubricant oil pilot plant for the new general used-oil technology in the Stanlow area in the first half of 2014.

Hydrodec then intends to create a lubricant oil re-refining business at Stanlow in partnership with Essar which is capable of processing up to 100m litres of used lubricant oil into high grade Group II+ and Group III base oil for sale into the UK and continental Europe by 2016.

The heads of terms are non-binding and the collaboration and proposals envisaged are subject to the entering into of definitive legally binding agreements.  There can be no assurance that any transaction will be concluded.

Volker Schultz, Essar Oil UK Chief Executive Officer, said:  "We look forward to jointly developing this innovative project, which will combine Hydrodec''s proprietary technology with Stanlow''s considerable operational and project execution expertise."

Ian Smale, Chief Executive Officer of Hydrodec, commented: "This agreement will transform our ability to deliver our UK strategy. In Essar and its Stanlow refinery we are partnering with a leading international oil refiner with all the existing facilities and capability required for the successful delivery of the Hydrodec re-refining process.

We believe a combination of our oil collection, feedstock delivery and technology with Essar''s refinery operations and process management expertise will prove extremely powerful for the longer term expansion of our business into new markets.  It has the potential to make the UK the oil re-refining hub of Europe."