Chinese Market Group II/III Technology

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For the past couple decades, the base oil industry has been trending from API Group I stocks to Group II and III. Around the world, most new or upgraded Group II and III plants have used hydroprocessing and dewaxing (hydrocracking and catalytic dewaxing) technologies provided by two Western companies – Chevron Lummus Global and ExxonMobil Refining and Technology.

In China, the two biggest national oil companies are trying to break into that business. Technical arms of Sinopec and PetroChina have both developed their own technologies that have been employed on some of their own plants. In addition, Sinopecs technology has been selected for plants recently opened or now under development by several independent refiners.

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The Chinese giants both say they have ambitions to offer their technologies in foreign markets, too, raising questions of whether they will create competition for CLG and ExxonMobil.

Sinopecs research arm, Fushun Research Institute of Petroleum and Petrochemicals, started research on base oil dewaxing technology in the 1990s and had its first generation of dewaxing catalyst in 2004. It now offers its second generation of catalyst and claims that it can deliver almost the same performance as the corresponding technology offered by CLG.

Our internal tests show Chevrons technology delivers slightly better performance than ours on viscosity, which we are going to improve in the next generation of catalyst, Yao Chunlei, director of special oil technology at FRIPP, told Lube Report Asia. He declined to say when the next catalyst will be launched.

Sinopec has employed FRIPPs technology at three of its own facilities: a Nanjing refinery that in 2004 added capacity to produce 100,000 metric tons per year of feedstocks for Group II producers; a 200,000 t/y Group II plant that opened in Zibo city, Shandong province in 2008; and a 150,000 t/y unit that will make white oils and aromatic solvents at its Nanjing refinery beginning in May.

Several other Chinese companies have also used FRIPPs technology, including Shandong Hrnd Group, which supplies a variety of petrochemical products, including lubes, greases and lead-free gasoline. Hrnd bought the catalyst for the 200,000 t/y of Group II base stock unit that started operation in August 2014. Others include Panjin North Asphalt Fuel Co., a joint venture between Baolai Group and Panjin Northern Asphalt supplying base stocks and bright stock, along with white oils for cosmetics and food industries; and PNAFs rival, Shandong Fangyu Lube.

FRIPPs technologies allow us to produce Group III base stock, Fangyu General Manager Cao Yonggang told Lube Report Asia.

Fangyu is to use FRIPPs technologies in its 600,000 t/y base oil plant, which is expected to start operation by June.

However, FRIPP was not Fangyus first choice for a technology supplier.

We turned to Chevron initially but were told its technology available in China is only for vacuum reactors with reaction pressure up to 16.8 megapascals, while ours is 20 MPa. We were running out of time so we had to find another option immediately, Cao said.

PNAF bought FRIPPss technologies for its 200,000 t/y of base stock facility, which is expected to start producing paraffinic base stocks by June, said a project manager at PNAF, who asked not to be identified.

I think FRIPPs technologies are very close to foreign technologies. During testing we didnt see significant differences, he said.

CLG told Lube Report Asia it sees competition in certain areas but believes its firmly established technologies are more than able to compete.

While FRIPP offers its technologies to companies other than Sinopec, Dalian Institute of Chemical Physics – which has worked with PetroChina on hydroprocessing technologies since 1999 – applies its paraffin iso-conversion dewaxing technology mainly to CNPCs refinery in Daqing.

Our technologies work best with paraffinic crude oil and Fischer-Tropsch wax to produce Group II and III base stocks, said Tian Zhijian, director at DICPs fossil energy conversion division.

DICPs current dewaxing catalyst PIC812, launched in early 2013, can be used to make Group II and III base oils, with about 10 percent yield loss for Group II and 30 percent for Group III base oils. Tian claimed PIC812 has better yields than foreign technology and that Chinese providers lag only in terms of marketing. To catch up with the foreign rivals, CNPC has hired a well-known technology company to advertise the PIC catalyst outside China.

While DICP, an operation under Chinese Academy of Sciences, has its own right to market and license its PIC catalysts, FRIPP has to rely on Sinopec to sell its technologies. Although currently none of the Chinese catalysts has made sales overseas, FRIPPs Yao said some Russian companies have shown interest.

FRIPP and CNPC insist their technologies have advanced enough to compete against the multinationals. However, competent technologies alone is not enough to easily win over clients, said Neil Wang, managing director in China for market research firm Frost & Sullivan.

Chinese hydroprocessing technologies have been developing fast, and it could to some extent affect multinationals licensing business in China, and I do think it is a trend in the future, Wang said. But one obvious advantage for multinationals is the stability of the technologies, thanks to their long-term applications in the global market. Obviously it takes time for Chinese technologies to gain that kind of rich experience.

Likewise, improving hydroprocessing technologies to produce base oils with better performance such as higher viscosity index is also not enough as these technologies continue to evolve in terms of process and catalysts, said Amy Claxton, CEO of the consulting company My Energy.

She gave some examples. In terms of processing advances there are reactor internals to improve conversion and thermal gradients, as well as configuration of vacuum distillation and hydrocracking trains. For catalyst advances, there are improved robustness to handle feed contaminants, and increased conversion via shape selective catalysts, catalyst pore size, and novel metal combinations, she said.

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