Petronas Plans to Double Group III Supply

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Petronas aims to double its supply of API Group III base oils within four years, a top official with its international lubricants arm said recently.

The company is still considering whether to expand its base oil plant in Melaka, Malaysia, or to form partnerships that would produce them elsewhere. Petronas Lubricant International Chief Commercial Officer Giuseppe Pedretti said the additional supply will be at least mostly Group III+.

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There are many ways to achieve higher capacity, Pedretti said during a video interview last week. We are planning at the moment. We can expand the Malaysian facility or cooperate in various forms with other producers within Malaysia or outside the country.

Currently, our biggest markets for base oil are Europe and Asia. Moving forward, we aim to place greater emphasis on North America as well. By 2023 we aim to be selling equal volumes in all three markets with total volume of 600,000 metric tons per annum.

Petronas Melaka plant has capacity to make 268,000 t/y of Group III and 50,000 t/y of Group II base stocks. The national oil company recently converted most of that capacity to two Group III+ cuts – a 4 centiStoke and a 6 cSt oil. Both have viscosity indices of 132. The American Petroleum Institute defines Group III oils as having at least 90 percent saturated hydrocarbon molecules, no more than 0.03 percent sulfur and VI of at least 120. Group III+ is an informal term that the industry generally recognizes as referring to Group III oils with VI of at least 130.

Our Group III+ is especially good for catering to the North American markets, meeting the needs for advanced 0W-XX lubricant formulations, Pedretti said. PLI is in the midst of securing tank storage at the Gulf of Mexico to strengthen its supply chain for the region. Currently the company supplies base oils from its terminals in Malaysia, Belgium, Brazil, China and South Africa.

The company said it recently upgraded the Melaka plant to make Group III+ instead of Group III oils with lower VI by optimizing the distillation cut and installing a new, licensed hydrotreating catalyst that enables the same yield profile as before.

The key to creating Group III+ is the unique high-wax feedstock, which is currently only accessible to three companies in the world, PLI being one of those, he said. Although the company will continue producing some Group III for its downstream unit and some customers, the majority of its production will be Group III+ that Petronas will export to original equipment manufacturers in the automotive industry.

The Group III+ oils are marketed under the Etro+ brand. According to PLI, they have low Noack volatility – 13 and 5.8 percent, respectively, for the 4 and 6 cSt oils – and excellent cold-temperature performance. The Malaysian company is one of several refiners – Adnoc and SK Lubricants are others – that have recently promoted Group III+ oils as being able to replace polyalphaolefins, which are more expensive, in the formulation of SAE 0W-XX passenger car engine oils.

Our main selling point is with the use of higher quality base oils, blenders can maintain performance without using so much cost and supply chain, Pedretti said. OEMs are faced with heavy penalties if they do not meet the increasingly stringent requirements towards lower emissions – and better fuel economy as a result. As such, they are looking for suppliers or partners that will be able to support them with alternatives in the face of increasing demand for and the scarcity of polyalphaolefin.

Group III+ base oils will definitely cut into the PAO market as it is an alternative to using PAO in low-viscosity formulations, he added.

One industry analyst suggested that it may not be practical for Petronas to expand its Melaka base oil plant.

Firstly, Petronas does not make Group III/III+ the same way as other Group III+ producers, said Stephen B. Ames, principal of SBA Consulting in Pepperpike, Ohio, United States. They use hydrotreating and hydroisomerisation as opposed to hydrocracking and hydroisomerisation. That limits the amount of VI upgrading they can do across the process. Thus they will need a highly waxy feedstock and therein lies the problem.

Petronas uses Tapis crude, a waxy, local oil, at its Melaka refinery, but supply of Tapis is declining, and Ames said there are limited sources of similarly waxy feedstock – none of which are clearly good options for what Petronas wants to do. But even if such a source were secured, Ames also questioned the practicality of the company finding or building a processing facility in Europe or North America.

Irrespective, I am not aware of any idle Group III plants, he said.

That would indicate Petronas would have to build [capacity]. The economics of doing so are not favorable today where some Group III sells for Group II prices. And with a plethora of new Group III capacity streaming in China – from refiners such as Hengli Petrochemical and Lu’An‘s coal-to-liquids plant – it does not look to improve anytime soon. PLI is already the factory fill oil for Mercedes Benz but as new standards are coming up for some future oils such as GF-6 from the International Lubricant Standardization and Advisory Committee and also OEMs, we plan to get more approvals and are working with our additive partners, Pedretti said.

Group III is a highly price competitive segment. The emergence of the Group III+ segment allows the few players in the market a competitive advantage over not just Group III players, but PAO players, he added.

– Caitlin Jacobs and Tim Sullivan contributed to this report