Rousmaniere said the MG3 plant is converting the gas oil to base oil. It is very light viscosity, about 2 centiStoke, so it is of no use in lubricant applications, but has use in process oil applications, he explained.

Base oils are more valuable than fuels, so we want to maximize the value of each barrel coming out the pipe by re-directing the fuels into lube and process oil applications, Rousmaniere said. These oils are just too good to burn. In 2010 we already converted 1,000 barrels per day, and now were designing the next part which, when completed, will get us up to the full 10,000 barrels per day of base oils from MG3.

Wed love to make another refinery at Melaka but that wont be likely any time soon, he continued. So what we are doing is finding other ways to create valuable base oils, in addition to those that we are already making.

As part of its Beyond Etro program, he said, Petronas Base Oil continues to vigorously pursue development of new products, including biobased base oils. Refining technologies are now becoming available which could make biobased oils a viable base stock for use in very demanding crankcase applications, he noted. Were waiting for that to happen, and we think thats going to happen.

Rousmaniere believes the market is very good for API Group III base oils worldwide, both in developed and developing economies alike. One market were particularly pleased with is Brazil where the pace of demand growth has been astounding, he said. The business for Group III in Brazil has grown phenomenally in the last few years. The potential demand had always been there but was not unleashed until we opened the first bulk Group III distribution terminal in Santos through our sister company Petronas Lubricants International. He added that Group III demand in Europe has proven insatiable, even in the face of the global recession.

While some Group II base oil is coming out of China, he pointed out, there has not yet been a major Group III plant built in China. One would think it would be inevitable that they would build them, but they havent, Rousmaniere said. You can ask the same thing about the United States. I started selling Group III there in 1995, when there was little Group III made in the U.S. One wouldve thought that someone would have built a big new Group III plant [in the United States] by now, but nobody has.

He is confident the next great wave in Group III demand will be in the heavy duty side of the market. A lot of new Group III will be coming to market, and a lot of it will kick-start conversion to using a Group III in heavy duty, he maintained. Right now, it is a relatively minor application. Once you have more Group III available, more applications will be created. The theory is, build it and they will come.

Rousmaniere was optimistic that rerefining is making strides in the marketplace, saying he was especially interested in seeing the reaction of the American market to Valvolines NextGen product, which is made from 50 percent rerefined base oil. Valvoline has made a very bold, revolutionary move, and I think has taken rerefined to the top shelf, he continued. I expect this will give a real jolt to the rerefining business in America and in Europe.

He noted that the rerefining industry is practically unknown in the Far East. There are just a handful of small rerefiners he continued. Asia is the biggest market for growth of lubes; therefore, it produces the biggest growth in waste oil availability. I think the tide of events is turning towards rerefining.

Rousmaniere pointed out that while rerefining is becoming common in many different countries outside of Asia, you hardly see a mention of it in India, Japan or Korea. Why not? Thats what I want to know.