In contrast, the United States experienced a period of stagnation where production levels plateaued. However, recent trends indicate renewed growth. While there are signs of movement toward Group III, the U.S. continues to focus mainly on Group II production. Russia, meanwhile, suffered a sharp decline in Group I capacity, but has regained some ground by investing in Group II and Group III facilities.

Western and Central Europe have followed a similar path to Russia, phasing out much of their Group I capacity. The gap has been partially filled by the development of two major Group II and III plants, which now play a critical role in the region’s production landscape. South Korea, once a rapidly expanding producer, has seen its growth level off. Its base oil capacity has remained relatively stable for several years, indicating a mature market.

Japan has gone in the opposite direction, with a noticeable decline in domestic production. To maintain its market position, the country has made at least one significant investment overseas. India is working to eliminate its long-standing deficit in base oil production. Through capacity additions and possibly increased imports of higher-quality oils, it is closing the gap between supply and demand.

Finally, the Middle East has emerged as a major force in the global base oil market. The region has invested heavily in upgrading its refining infrastructure and now serves as a key hub, particularly for Group III base oils. This development has positioned the region as a significant exporter and a growing influence on global supply chains.

Overall, the global trend is a clear shift away from Group I base oils toward more advanced Group II and III materials. This transition reflects technological progress and the rising quality demands of modern engines and industrial machinery.

Demand for Group I has fallen enough to make it economically unviable. But regional trends for Group I on its own paint a more nuanced picture. Europe still has the most capacity, despite successive closures of Group I units over the past 20 years. Since 2017, capacity in rest of the world stayed the same.

The reverse is happening with Group II, as more units come on line, both virgin and rerefined. Now considered as a “workhorse grade,” Group II has taken on many of the applications once occupied by Group I. The opening of the Exxon Rotterdam unit in 2019 accounts for the noticeable step up in Europe.

Similarly, Group III is also increasing, chiefly in East Asia yet still has little uptake in North America, when the big players are still all in on Group II.

Naphthenics production has remained fairly constant.

Capacity Concentration

A significant portion of the world’s base oil production capacity is concentrated in a relatively small group of countries – namely the United States, China, South Korea, India, Russia, Japan, Saudi Arabia, Iran, Qatar, Spain, Belgium and Italy. This leaves the majority of countries with little or no domestic base oil production. Despite this imbalance, a few of the countries that lack substantial capacity remain noteworthy due to their potential or unique challenges.

Iran is a case in point. Once a regional leader in the Middle East’s base oil sector, Iran has seen its position erode due to international sanctions, which have severely restricted its ability to attract investment and modernize its facilities. Local producers like Behran Oil Company have made efforts to upgrade, but these have been hindered by the inability to access advanced technology from companies like ExxonMobil and Chevron. At one point, Iran attempted to collaborate with French firms, but those efforts have also faced difficulties due to geopolitical constraints.

In Brazil, the long-anticipated development of a major base oil anchor for South America has yet to materialize. Projects like Gaslub and other proposed expansions remain stalled, often due to bureaucratic delays and a sluggish privatization process. As a result, the country has not yet fulfilled its potential to become a regional production hub.

Mexico also holds considerable potential for base oil production but faces internal challenges. The state-owned company Pemex continues to dominate the industry, often acting as a bottleneck to progress. Facilities such as the Salamanca refinery have seen shrinking capacity and now operate on the brink of viability, highlighting the urgent need for reform or investment.

Big Gets Bigger: Comparing World’s Biggest Base Oil Plants in 2005 and 2025 

These examples underscore how, despite global trends toward capacity expansion and technological advancement, several key markets remain constrained by political, economic or institutional barriers. The global base oil landscape is not only shaped by who has capacity, but also by why so many others still do not.

The world’s 10 largest base oil refineries account for about a quarter of the world’s production capacity. Six of them are located in South Korea and the United States. About three-quarters of their capacity is API Group II.

The trend has been for plants to grow ever bigger. In 2005, one of the world’s largest was Baku, which 20 years ago produced 845,000 tons per year. This has since been eclipsed

Over the same period, numerous base oil refining units, especially Group I, have shut down across the world as global demand shifted and refineries were restructured or repurposed.

The majority of them were Group I units. While the grade still has a firm place in the finished lubricants market, it is slowly being pushed out by Group II base stocks, which can often be less expensive. This trend continued in 2023 when Eneos closed a Group I plant in Japan and Sapref shuttered a Group I facility in South Africa.

Refinery Openings and Closures