Mumbai: Indias Top Base Oil Gateway

Mumbai is the leading point of entry for base oil imports into India - one of the worlds largest importers of such products - thanks to better infrastructure and connectivity with other regions, according to industry insiders.

The country is estimated to have imported 2.9 million metric tons of base oil in the fiscal year that ended March 2019, up 5 percent from 2.7 million tons a year ago, according to Mumbai-based Petrosil Group, which provides market intelligence reports on base oil, petroleum and chemical products. South Korea supplied 51 percent of those imports in the 2018-2019 fiscal year, followed by Singapore at 14 percent, the United States at 10 percent, and Saudi Arabia and the United Arab Emirates at 7 percent each.

India has 12 major ports and several minor and intermediate ports, but the bulk of the imported base oils enter India via Mumbai, the Petrosil data showed. The port took in 62 percent of the countrys total base oil imports last fiscal year, followed by the Jawaharlal Nehru Port Trust at 12 percent, the Chennai port at 9 percent, the Pipavav port at 4 percent and the Hazira port at 3 percent.

Mumbai port is handling the largest base oil import cargoes due to ease in getting the logistics services providers - like clearing and forwarding agents - surveyors, barging facilities, plenty of storage terminals and [an] excellent transportation network, Dhiren Shah, editor-in-chief of Petrosil Group, told Lube Report in an interview.

Dushyant Mulani, vice president of Mumbai-based custom house agents body Brihanmumbai Custom Brokers Association, agreed. The Mumbai port offers better infrastructure and efficient handling compared to other ports, he said. The infrastructure and ease of doing business have made an [impact] …. More and more cargoes are coming towards Mumbai.

The government-owned Mumbai Port Trust is located on the West Coast of India. The port offers various facilities such as berthing, equipment services and cargo handling, dry docks, stevedoring, bunkering, reefer points, storage of cargo in the docks and liquid storage tanks, roads and connectivity to a rail network via the ports own railway as well as a reception facility for ship-generated waste, according to its website.

Talking about the Mumbai ports leading position for base oil imports, an industry consultant said most blending facilities operated by the countrys biggest lubricant suppliers are in western India. The driving factor was availability of both domestic base oils and imported base oil vessels touching Mumbai port due to its better connectivity with the external world, said Shailendra Gokhale, managing partner of Mumbai-based Rosefield DAA International Consultancy LLP. He added the situation is expected to remain unchanged for the foreseeable future.

India is the worlds third-largest finished lubricant market but doesnt have the domestic base oil capacity to match, making it one of the biggest base oil importers globally. The countrys annual base stock production capacity is estimated to be around 1.2 million tons, and it imports more than 2.5 million tons every year. API Group II accounts for the biggest share of imports, followed by Group I, Group III and naphthenics.

According to Petrosil, India is estimated to have imported 1.4 million tons of base oil from April to August this year. The Mumbai port accounted for 61 percent of that amount, followed by JNPT at 11 percent, the Chennai port at 9 percent, the Pipavav port at 5 percent and the Hazira port at 4 percent

Shah projected Indias base oil imports from April 2019 to March 2020 to grow by 3 to 4 percent. He added the volumes are rising due to an increase in the re-export of base oils after reprocessing into transformer oils, white oils and IP-grade liquid paraffins. Shah said affordable import prices and a preference for higher quality finished lubricants, especially from the automobile industry, drive the demand for quality base oils.

Lubricant demand in India has grown steadily in recent years, but Gokhale noted that domestic base oil production has never gone up and remained steady at 1 million t/y. Also, capacity added by Indian refiners for Group II a few years back was not in line with the overall demand for Group II base oil, which was on the rise due to factors like the emergence of lighter oils with higher viscosity index, he added.

The country has four domestic base oil producers, all government-owned: Bharat Petroleum Corp. Ltd., Indian Oil Corp. Ltd., Hindustan Petroleum Corp. Ltd. and IOCL subsidiary Chennai Petroleum Corp. The group has made little investment in their base oil businesses in recent years, but some now have their eyes set on increasing capacity.

Petrosils Shah said the domestic refineries are going for upgrades, which will help improve the supply situation in the country. Gokhale echoed the sentiment. Of course, things on the supply front in India will change with base oil capacity addition by IOCL and BPCL, he said, adding that demand for high quality base oils, Group II and Group III, will only go up.