“These changes impact the lubricants industry, not only in terms of the products that we are making, but also the production sites where the components for those lubricants are made,” Pottorf noted.

One of the sectors where the changes have been most evident is the base oils industry and its shift to more high-performance, environmentally conscious products. In the early 1990s, most base stock plants in the world produced API Group I base oils, comprising 93% of global production. Group I base oils have been produced since the 1930s using solvent extraction, a technology little changed since.

Toward the end of the 20th century there was a large swing to Group II and Group III production as more companies invested in new technology. Meanwhile, many Group I plants closed.

“Fast forward to today, Group I is now down to about 30% of production, while Group II and Group III make up the other 70%,” Pottorf remarked.

Drivers of Change

The type of lubricants needed in transportation, automotive and industrial applications drove that shift. These drivers have been shaped by population and economic growth. More people need more energy and energy-related products, which need efficiency and emission controls, and the industry has had to address all of these concerns.

”The numbers are staggering,” Pottorf said. ”An additional 2 billion people globally by 2050 and a doubling in the size of the world’s economy are expected. So access to affordable and reliable energy and energy-related products will be needed to enable billions of people around the world to live longer and healthier lives. And yet even today, many don’t have clean cooking fuel or reliable electricity.”

Greater access to energy and related products to improve the standards of living will lead to the largest expansion of the global middle class in history, Pottorf added. Despite this massive increase in population and economic growth, energy use is only projected to grow by 15%, largely as a result of effective efficiency gains.

“Probably the biggest change to the energy landscape will be the rapid expansion in solar and wind, a five-fold increase over this period. And yet for all of their promise, wind and solar will only be part of that solution, alongside biofuels, carbon capture, hydrogen and nuclear. And even then, we still see oil and natural gas continuing to meet more than half, or about 54%, of the world’s energy needs.”

Critical to the Paris Agreement’s goal of reducing energy-related CO₂ emissions by about 25% from today’s levels by 2050 is the fact that half of society’s emissions come from hard to decarbonize sectors such as industrial activity and commercial transportation. Those two sectors alone will capture nearly half of the world’s emissions in 2050.

A large share of the world’s population growth will occur in Asia Pacific, with the population expected to increase by 470 million people by 2050, which represents about 25% of the global population growth. At the same time, GDP is expected to be nearly triple of what it was in 2021. As the GDP is growing so much faster than the population, it means that living standards will continue to improve, Pottorf explained.

The primary energy demand projections for the APAC region by sector show that electricity generation is the largest and fastest growing sector, increasing by around 90%, driven mainly by expanding access to reliable electricity in developing countries.

Demand from the industrial sector, which supports the construction of buildings and infrastructure and the manufacturing of products, is also growing, but some of that growth is going to be tempered by efficiency improvements and some shifts of the economy between heavy industry and services.

Commercial transportation is also going to grow with an increase in the need to move goods around the world. And within the personal mobility area, there will be efficiency improvements and more electric vehicles, which will offset the increase in vehicle miles traveled.

But the two sectors that will probably have the greatest impact on the base oils and lubricants industries will be transportation and industrial production.

The APAC car fleet is projected to reach 1 billion in 2050, according to Pottorf. More advanced vehicles such as battery electrics, plug-ins, hydrogen fuel cells and hybrids are projected to gain share as they become economical to a wider range of consumers. By 2050, advanced vehicles will make up over 60% of the APAC fleet and will have vastly surpassed gasoline vehicles.

The projected transportation demand by fuel source shows that diesel demand will continue to grow by about 40%, while gasoline demand is expected to peak by 2030 and then slide as alternate power trains gain share for both cars and motorcycles and efficiency requirements increase.

Energy demand from the industrial segment is expected to increase by 25% by 2050, mainly driven by chemicals and heavy industry.

Greater efficiency plays a pivotal role in future energy demand and this requires an acceleration in the performance qualities provided by lubricants. Lower greenhouse gas emission expectations have also been a focus for some time in terms of lubricant attributes, together with longevity, less waste and circularity goals.

New energy systems will emerge, such as EV immersion cooling systems that require new lubricant applications, while at the same time, there will be a need  for lubricants that meet the specifications of existing internal combustion engines, but these will need to provide greater efficiency.

Lubricant Industry Role

It is the lubricant industry’s role to deliver products capable of meeting the challenges associated with a transitioning world, and that a lot of these conditions are converging in the APAC region, said Peng Ann Yap, Exxon’s market planning manager for the Singapore Resid upgrade project.

The projected growth for finished lubricant demand in APAC is driven by population and economic growth, and will be mostly led by India, followed by countries in Southeast Asia. China will remain an important and influential market as well.

The demand for transport lubricants is expected to peak and decline by 2050, driven by electrification trends, while consumption growth in the industrial and marine segments will be supported by burgeoning demand for durable goods.

As for the base oils needed to make these lubricants, there will be a continued quality shift in Asia toward Group II and III base stocks, driven by greater efficiency, lower emissions and less waste, produced at scale and at an affordable price.

Increasing efficiency requirements in the transportation and industrial segments will drive the need for more light neutral grades, while there will be higher demand for heavy and extra heavy neutral grades from the commercial, industrial and marine sectors.

In the personal transportation segment, lubricant manufacturers face the challenge of having to produce lubricants that can offer better fuel economy and hybrids that operate in start-stop conditions, and this requires lower viscosities with lower volatility. Improved efficiency in both personal and commercial transportation requires lubricants with a higher viscosity index.

In the industrial and power generations sectors, the need to handle greater loads demand lubricant and greases with higher shear resistance.

An increased circularity might be achieved by the use of rerefined feedstocks, while a lower lubricant carbon footprint would require the use of bio-feedstocks or other lower GHG emission technologies.

“Most heavy grades have until recent years come from the Group I category, but there have been worldwide plant rationalizations, leading to a decrease in Group I production. The APAC region has lagged in rationalizations relative to the global trend, but they have resulted in a steady loss of bright stock capacity,” Yap explained.

Most capacity additions in APAC have focused on Group II and Group III production. However, only negligible Group II capacity for extra heavy base stock has emerged to replace the lost Group I bright stock output, which has led to a deficit of this grade. More than 20% of the world’s Group I bright stock capacity has been lost since 2010 and this has resulted in tighter supply/demand fundamentals, Yap noted.

The need for more bright stock is one of the reasons ExxonMobil has embarked on the Singapore Resid Upgrade Project, which is expected to start up in 2025 and will add a capacity of 20,000 barrels per day of Group II high-performance base stocks, and up to 6,000 bbl/d of Group II extra heavy neutral base stocks.

According to ExxonMobil, the company will produce an innovative Group II extra heavy neutral base stock, which will be sold under the EHC 340 Max brand, that has similar characteristics to Group I bright stock, but offers upgraded performance. The upgrade project will also allow the company to offer additional supplies of the EHC 50 base stock and introduce the EHC 120 cut to the APAC region.

Given the significant growth in population and greater prosperity expected in Asia, the regional base oils and lubricant industries will likely undergo some of the most impactful changes compared to the rest of the world, and market players need to be informed and prepared today to meet the market demands of tomorrow, Yap concluded.