To meet the demands of higher quality, China must improve the product mix [of base oils] from our refineries, Liu Zhongda, the deputy director of the PetroChina Lubricant Co.s Planning Department, said Thursday during a presentation at the Asia-Pacific Base Oil Conference sponsored by F&L Asia.

Karamay is the largestnaphthenic base oil plant operated by PetroChina. According to Liu, the Karamay facility has capacity to make 500,000 metric tons per year, half of which is already hydroprocessed through a unit installed in 2000. The new unit would treat the plants remaining volume.

Liu said China needs to increase the volume of base oil it produces and also to improve the quality. With its rapid pace of economic growth, consumption of finished lubricants has been climbing at a steady clip, creating a need for greater volumes of base oil imports. The country imported 1.2 million metric tons of base oils in 2004,Liu said, 43 percent more than the previous year. Base oil exports – mostly naphthenics – dropped 52 percent in 2004 to just 45,000 tons.

China has domestic capacity to make 4.8 million tons of base oils a year. PetroChina claims 2.9 million tons of that capacity, while another 1.4 million tons belongs to Sinopec, Chinas other national petroleum giant. Threesmaller refinersmake the rest.

Liu said China also needs to address a mismatch between the quality of base oils needed for its lube market and those it manufactures domestically, since the quality demanded for finished products is also rising. He said PetroChina and Sinopec need to improve [their] work on Group II and Group III stocks, which currently account for 14 percent of domestic capacity. Forty percent of base oil imports in 2004 were Group II or III.

No expansions or upgrades are currently scheduled, however, except the Karamay project. Sinopec has said it is considering installation of a 400,000-ton hydrocracker that would upgrade production at its paraffinic plant in Maoming, but that plan has no timeline.