MUMBAI – India is importing enormous volumes of base oils, and those imports are helping the market to raise the quality of its finished lubricants.
Speaking April 29 at the ICIS India Base Oils & Lubricant Conference here, Milind Phadke, director of Kline & Co.s Energy Practice noted that India is the worlds third-largest lube market, consuming 2.3 million metric tons per year, counting process oils. If finished lubricant exports are also considered, the countrys annual base stock requirement is 2.9 million tons.
However, domestic base oil plants only produce about 900,000 t/y.
India is dependent on imports for supplying more than two thirds of its blending requirement, Phadke said. The proportion of imports is rising. In 2008 they constituted approximately 30 percent of the domestic requirement.
Of the 2 million of base stocks that India imports, 50 percent come from South Korea, 13 percent from United States, 9 percent from Singapore, 5 percent from the United Arab Emirates, 5 percent from Bahrain, 4 percent from Taiwan and 13 percent from the Netherlands, Russia, Malaysia, Qatar and Iran.
Phadke noted that imports raise the average quality of base stocks in the market. The country has four base oil plants with combined capacity of 1.2 million t/y. Hindustan Petroleum Company Ltd. has 42 percent of this capacity, Indian Oil Corp. 22 percent, Chennai Petroleum Co. 19 percent and Bharat Petroleum Co. Ltd. 17 percent. Sixty percent of domestic capacity is API Group I, and the rest is Group II or Group II+. Once imports are added in, however, 61 percent of the total base oil consumption is Group II, compared to 32 percent Group I, Phadke said. Group III oils and naphthenics account for 4 percent and 3 percent, respectively, of total base stock consumption
Phadke predicted that demand for Group II/II+ oils will grow to 2.1 million tons by 2018, up from the existing 1.7 million tons in 2013. Group I demand will barely rise during that timeframe, from 850,000 t/y to 900,000 t/y, he said, whereas Group III demand will jump from 150,000 t/y to 250,000 t/y.
Kline forecasts that Indias finished lubricant will rise at annual rates of 2.5 percent for the next several years, significantly slower than for much of the past decade. But Phadke maintained that India is an attractive market for base stock marketers because of ongoing growth potential, improving quality levels and the expanding deficit in domestic base stock supply.
The market is not without challenges. Phadke said that profitability of base stock imports is challenged by depreciation of the rupee, which makes base stock imports more expensive. In addition, a large portion of base stock imports go into low-value finished lubricants or non-lubricant applications. Increasing demand for high-performance lubricants may ease this situation.
The Indian lubricant market is very competitive marked by the presence of national oil companies, international oil companies and a number of independents, Phadke said.
Indian Oil Corp. is the leading supplier, with about 18 percent of the 2.3 million ton market, followed by Hindustan Petroleum, Bharat Petroleum, Castrol, Apar Industries, Raj Petro Specialties, Colombia Petro Chem, Shell and.
Process oils are the largest segment of the market, accounting for 29 percent of demand volume, Kline estimates. Heavy-duty motor oils are the second-largest segment, followed by general industrial oils, motor cycle oils, industrial engine oils, metalworking fluids, passenger car motor oils, hydraulic fluids and grease.