In other words, North American and European shares of Group III supply will increase Asias declines. This may lead to an increasing consumption of Group III in Asia as there will be lower demand from the other regions, Huang said.Asia has to digest more Group III produced by itself, particularly when the global market demand is expected to show a limited growth and Asia has a significant surplus of Group II and III and a deficit of Group I.

According to Klines statistics, between 2004 and 2012, the share of Group II and III in overall supply has grown from 22 percent to 40 percent. Asia exported nearly 900,000 metric tons of Group III base stock to Europe, North America and South America.

Last year, Asia consumed 15.6 million tons of base stocks, accounting for 43 percent of global demand. China was the largest consumer followed by Japan and India. Most of the Group II surplus is absorbed in a Group I substitution push along with surplus Group III, Huang said. Group I share of overall global demand has declined by almost 15 percent in 2013 from 2007 levels.

Against this backdrop of a surplus supply of high quality base stock in Asia, she added, The global placement of Group III production will have a profound impact on formulations used in each region as changes in availability of Group III in each region will drive changes in formulations of lubricants. Higher availability of Group III may result to increasing application of Group III in lubes blending.

Eventually, the choice of base stock is increasingly driven by choices made by suppliers and blenders, and lubricant quality requirements no longer shape base stock demand, Huang emphasized.

According to Huang, refiners plan to add about 10 million tons per year to Group II and III capacity to the global supply base during the next decade, and one third of it will be built in Asia.

Driven by availability of high performance base stocks,the penetration of syntheticand semi-synthetic lubricants in Asias consumer segment will increase to more than 30 percent by 2023. In addition, growing emphasis on fuel economy will drive an increase in the use of lighter viscosity passenger car motor oils. There will be a shift in lubricant blending and [the market will have] an increasing share of high quality lubricants, she added.

Although Huang sees Asia using more Group III in lubricant formulations, she contended that, In China, there is a tendency to use high performance base stocks [for lubricant formulation] but the performance is not equivalent or is even lower than what they expected. There is still a problem with formulation technology.

Kline estimated last years global lubricant demand at 39.2 million tons, a 1 percent increase compared to 2012. Asia accounted for 42 percent, followed by North America and Europe with 24 percent and 17 percent, respectively.

The base stock industry needs to be thinking of a future very different from the past, Huang said. Demand growth drivers are changing, and strong growth is not a given. Accelerated closure of high-cost plants is almost inevitable. Group I is the obvious target, but naphthenics and smaller Group II plants are also at risk. She predicted that 3.5 million t/y to 5.5 million t/y of global base stock capacity will have to be closed.

Huang also expects a radical revamping of the remaining Group I capacity to maximize production of heavy neutrals and bright stocks as overcapacity has essentially destroyed inter-Group quality premiums. With nearly 10 million tons of new base stock capacity announced, she said, about 8.7 million tons is considered credible.

For the rest of this decade, Huang predicts a re-positioning of ownership in base stock production as companies seek better returns on capital.