The looming shortfall of bright stock can be managed by use of alternatives along with addition of new capacity, said Ernie Henderson of K&E Petroleum Consulting at a recent industry meeting in Houston, Texas.
The Asia-Pacific region accounts for about half of all bright stock demand, which is in line with the regions appetite for lubricants in general. Developing regions, especially China, have maintained this demand because of old equipment and technology that require monograde oils.
While 20 percent of bright stock demand outside of North America is still in the automotive sector, that is demand that were eventually going to lose, Henderson said. The change will be driven by a shift from monograde to multigrade engine oils, reducing demand by about 10,000 barrels per day. This shift alone will help to address a significant portion of the expected bright stock shortage, he pointed out.
In North America, Henderson continued, our demand has shrunk dramatically over the last decade or two. The automotive sectors increasing demand for lower-viscosity SAE grade engine oils has cut deeply into the API Group I and bright stock market. By contrast, the industrial segment has seen little change in the same time period, ensuring that some regional demand for bright stock has continued.
On the supply side, about 70 percent of Group I refineries produce bright stock, and the top ten producers account for 60 percent of global capacity. Currently, Asia-Pacific and Europe have the largest production capacity. The healthy market balance in North America – a slight excess of supply over demand – has allowed bright stock to maintain the highest U.S. market value in the base oil market, Henderson stated.
This balance is in flux. While global demand for all base oils is expected to grow just 1 percent over the next few years, said Henderson, the capacity coming onboard significantly outstrips that. The predicted consequence is rationalization at the expense of Group I, which can be seen in upcoming plant closings such as Q8 Oils refinery in Rotterdam and Shells in Pernis, Netherlands, as well as ExxonMobils plant in Beaumont, Texas. This is expected to result in a shortfall in bright stock supply of 15,000 b/d to 17,000 b/d by 2020.
Not all news spells doom and gloom for bright stock, and more capacity is coming online despite Group I reductions. Ergon will introduce a new Group I bright stock next year. Saudi Arabian refiner Luberef is changing over its Yanbu refinery from Group I to Group II, but the plant will more than double its bright stock capacity from 84,000 to 175,000 metric tons by 2016. Theyre leveraging existing facilities to increase the availability of a high-value product in the marketplace, in this case bright stock, Henderson reported.