This will create greater demand for Group II and other high quality base stocks and limit the market for Group I, Kumar said.

India is the worlds third-largest lubricant using country, having consumed 2.3 million metric tons in 2015, Kline estimates. That volume, which includes process oils, represented an increase of less than 1 percent from the previous year.

The country produces relatively little base stocks compared to volume it consumes. It has four base oil plants with combined capacity to make 1.2 million t/y, but their actual output in 2015 was just 900,000 t/y. As a result, the country imported 2.5 million tons of base stocks last year. Forty-eight percent of that volume was imported from South Korea, 13 percent from the United Arab Emirates, 12 percent from Singapore and 11 percent from the United States.

Kumar did not offer precise estimates of Indias demand for different grades of base stock, but a pair of Hindustan Petroleum Corp. Ltd. officials, speaking at the same conference the next day, said 60 percent of the stocks consumed in 2015 were Group I, 30 percent Group II and approximately 5 percent Group III.

Lubricant markets in Europe, North America and Japan have already undergone big shifts from Group I to Group II and/or Group III. Emissions-reducing technologies installed by automakers require base stocks with lower levels of impurities such as phosphorus, while fuel economy mandates have spurred use of lighter base stocks and a need for lower levels of unsaturated molecules. For both of these parameters, Group II and III oils outperform Group I. Group II and III also bring better thermal and oxidative stability, which was needed to meet automaker demands for lubricants that last longer.

As Kumar noted, those same forces are now coming to bear in India. The national government announced that it will skip Bharat Stage V emissions regulations, jumping from BS IV to BS VI in 2020. A stronger fuel economy mandate takes effect next year, and original equipment manufacturer lubricant recommendations are already converging with global specifications.

As a percentage of existing demand, Kline predicts that Group III base stocks will see the fastest growth in India through 2020, while Group II will grow the most in terms of volume. In addition to performance advantages, Indian lube blenders have been encouraged to switch to Group II because of easy availability and attractive prices. Since 2014, Group II 150 and 600 neutrals have cost less than corresponding Group I oils.

Group II and III oils are readily available in India because of its proximity to production hubs in South Korea, Southeast Asia and the Middle East, and Kumar noted that availability should only improve with more projects now underway that will add more capacity.

Kumar predicted that the volume of Group I consumed in India will remain flat in coming years, even as its share of the market declines. While Group II and III gain in popularity for applications such as crank case oils for passenger cars and heavy-duty trucks, Group I stocks will still be preferred for marine lubricants, industrial engine oils, general industrial lubricants, metalworking fluids and greases due to their higher viscosity and greater solubility. Moreover, some blenders of finished products are simply reluctant to switch base stocks.

Despite the limited growth outlook for Group I, it will continue to grow in applications that require high viscosity and solubility, Kumar said. He added that naphthenic base oils will gain ground in metalworking fluids, greases and process oils.