It’s no secret that base oil production capabilities in Latin America lag far behind those of powerhouse regions like North America and Asia. But market dynamics are constantly shifting, and there is no surefire way to know in which direction the winds of change may blow. Might Latin America be on the cusp of increased production capacity, or will its base oil output dwindle, forcing the region to import larger volumes of base stocks from other locations?
First, it’s important to examine what market demand for base oils currently looks like across Latin America. Industry experts—Brad Chatterjee of Superbasicos, Angelo Cozzolino of Acelen and Luis Gamez of Gheco Trading—agreed during a panel discussion at the ICIS Pan-American Base Oils and Lubricants conference in Jersey City, New Jersey, last December that the region has a strong appetite for base oil, mostly due to high demand for automotive lubricants in countries like Brazil and Mexico. In fact, Brazil was the fifth largest consumer of finished lubricants in the world in 2021.
However, like every other region, Latin America was hit hard by the COVID-19 pandemic in 2020, which caused a sudden and sharp drop in personal driving as well as the transportation of goods. This coincidentally caused demand for base oil to dip, and refineries around the world—Latin America included—were forced to taper off their production volumes for a time.
Is demand in the region now on the road to recovery? Most signs point to yes. But the region suffered a bit of a setback when Russia invaded Ukraine in February 2022, beginning a war that is ongoing even a year later. Sanctions placed on Russian goods by European countries as well as the United States managed to put a wrench in oil and gas trading dynamics, and no one region has been completely immune to the supply issues.
Despite these roadblocks, though, Chatterjee said that demand for base oil in Brazil—one of the region’s key markets—has grown in recent months.
Is that demand being filled domestically, or are other regions helping to meet the country’s base oil needs?
According to Chatterjee, about half of Brazil’s base oil comes from other regions, while nearly 35% is produced domestically and 15% comes from rerefiners. The country’s volume of imported base oil rang in at about 550,000 cubic meters in 2021. Brazil has capacity to produce 12,950 barrels per day of Group I base stocks, 1,550 b/d of Group II and 1,290 b/d of naphthenic base stocks, according to Lubes’n’Greases 2022 Global Base Stock Plant Guide.
So what does the future of base oil production look like in the region? While it is impossible to know for sure, Chatterjee predicted that factors such as global and domestic base oil pricing, logistical complications and higher freight rates will hold production steady with current levels and that the region will continue to import large volumes of base oil to fulfill its needs.
Sydney Moore is managing editor of Lubes’n’Greases magazine. Contact her at Sydney@LubesnGreases.com