Australian lubricant and grease blenders say they have adjusted to a new playing field for sourcing base oils in a market devoid of its own production, but they remain watchful for international events that could disrupt the supply on which they depend.
The country, which had four base oil plants in 2002, now has four importer-distributors after last months announcement by United States-based refiner Chevron that Caltex Australia will distribute its base stocks down under. Back when the domestic base oil plants were closing, during the first decade of this century, some lubricant producers worried that base stock procurement would become difficult, but blenders say those concerns have proved unfounded – at least during these times of large surpluses in the global market.
Its quite easy to get because of the systems set up by the people importing, said Greig Herden, technical manager at Hi-Tec Oils, a lube blender based in Smithfield, New South Wales. Its generally easy to come by and theres plenty of it. The trouble is if we have anything go wrong with the shipping lanes we dont have very good stockpiles.
The four base oil plants that operated in Australia all closed by 2011, when the last one, Caltexs plant in Kurnell, ceased operations. Today lubricant blenders depend almost completely on imports, along with a small portion of domestic rerefined base stocks. The bulk of imports are from Singapore, but shipments also find their way here from other Asian countries, though some stop over at Singapore on their way.
Hilditch Pty imports oils from several suppliers to storage terminals in Port Kembla, north of Sydney, and in Melbourne. The Australian firm sells Group II from the Shell-Hyundai Oilbank joint venture in South Korea, Group III from South Koreas SK Lubricants and bright stock from Thailands IRPC.
Quality Logistics Services Australia, a unit of Rio industrial group, imports and distributes ExxonMobil Group I, II and III base stocks as well as Group III oils produced by Malaysias Petronas. Oil tankers from Singapore are offloaded at ports Botany in Sydney and Coode Island in Melbourne, according to QLSAs website. Greg Croaker, business manager, at QLSA, said product is also shipped in from further afield, including from the U.S., Belgium, Japan, Taiwan and other parts of Asia.
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Australian Solvents and Chemicals Co. operates a terminal in Springwood, Queensland, and started importing Group II stocks from another South Korean refiner, S-Oil, in February 2014. This year they added S-Oil Group III to their slate. ASCC also imports and distributes ester base stocks.
The continent also has several sources for synthetic polyalphaolefin base stocks, including Ineos, Chevron-Philipps Chemicals, Naco, Crompton and ExxonMobil. This is one area where constraints are apparent, according to Tony Lawton, manager for Asia and general development at Melbourne-based lubricant blender Penrite Oil.
All have had a degree of tightness, and this is still forecast to continue, Lawton told the ICIS Asian Base Oils and Lubricants Conference earlier this year, commenting on PAO suppliers.
While lubricant manufacturers have little difficulty obtaining base oils today, some sources said they worry that tensions in the Asia-Pacific region, specifically involving North Korea and between China and its neighbors, could boil over into conflicts that disrupt trade.
However, Bob Carr, former Australian foreign minister and presently head of the Australia China Relations Institute at the University of Technology in Sydney, told Lube Report Asia the main shipping route for supply – Singapore to Australia-would be unaffected in the event of any interruption to lanes in either the East or South China Seas.
Meanwhile, rerefiners of used lubricants have expanded locally to produce as much as an estimated 10 percent of local demand, though that growth is now limited as lubricant brand marketers shy away from it and as the capture of more used engine oil becomes difficult.
The rerefiners include Cleanaway, which produces Group I and Group II base stock at its Rutherford plant two hours north of the countrys most populous city – Sydney.
Northern Oil Refinery and its associated company, Southern Oil, produce Group I stock at plants in Wagga Wagga, three hours north of Melbourne and at Yarwun, near Gladstone in Queensland state. Tim Rose, the general manager of both Southern Oil and Northern Oil, said the use of rerefined base oil in Australia has more than doubled in the past decade to an estimated 50 million to 60 million liters. He estimated total base oil demand in Australia at about 650 million liters.
Overall, the base oil market in Australia isnt as big today as it was a couple of years ago, said Greg Croaker, business manager at QLSA, citing longer drain intervals that have come with the introduction of higher grade synthetic blends for the cuts. Were a lot more efficient in our use of lubes than we were 10 years ago.
Another reason cited for declining local demand for base stock is that big international oil companies are moving more to importing finished product, rather than blending locally. Were swimming against that tide, said Rose.
Australian Petroleum Statistics from the Australian governments statistics bureau, released earlier this year, show that imports of lubricating oils, greases and base stocks into Australia were valued at AU $779 million (U.S. $587 million) in the year ended June 30, 2015. The government does not provide a breakdown of those three products. Singapore, an Asian hub for refining and chemical manufacturing, accounted for the lions share, or almost half at AU $362.6 million. The next biggest source was the U.S. with AU $118.6 million. Asia accounted for most of the rest – Korea AU $81.3 million; Malaysia AU $36.5 million, Thailand AU $31.4 million, India AU $10.8 million, Philippines AU $10.3 million, Japan AU $4.2 million and Indonesia AU $3.8 million.
Local lubricant blenders appear to have welcomed the agreement between Chevron and Caltex Australia to bring the former companys base stocks to the market. We have dual supply just to make sure we have secure supply, said the procurement manager from a mid-sized local blender who asked not to be identified. He said sourcing base stocks had been known to be difficult since the shutdown of the local virgin refineries. It will be good to have [another] supplier as competition is always good.