Mixed Outlook for Base Oil in Europe

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Mixed Outlook for Base Oil in Europe

European base oil supply and demand trends will remain mixed for the remainder of the year, with capacity closures amid a general shift towards API Group II and III base stocks, ICIS Sarah Trinder told a conference in Amsterdam last month.

The Group I market is still seeing the ripple effects of market rationalizations of previous years while tight supplies of Group II base oils stand in the way of wider market adoption, Trinder said at the ICIS & ELGI Industrial Lubricants Conference on June 19.

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Photo courtesy of Rosneft

Last year, Rosneft began offering Group III base oils from its Yaroslavl refinery, a 50/50 joint venture operation with Gazpromneft.

Group III supply and demand has yet to balance out, although the effects of the temporary shutdown of the Pearl gas-to-liquids (GTL) refinery in Qatars Ras Laffan Industrial City in early 2017 have largely abated. Co-owned 50-50 by Shell and Qatar Petroleum in a joint venture, the plant can produce up to 1.1 million metric tons of Group III and 300,000 t/y of Group II base oil.

Trinder expects an ongoing market shift from Group I to high-performance Group II and Group III base stocks, with the inevitable Group I capacity closures leading to tight supplies of some grades, particularly of bright stock.

The European market for Group II base stocks stands to benefit from the new plant being built at ExxonMobils Rotterdam refinery. The $1 billion project will begin supplying Group II base stock from early 2019 onwards. According to Trinder, the plant is expected to offer 600 and 150 neutral equivalents, with the latter being an easy swap for the Group I solvent neutral 150.

The new supply, rumored to be around 900,000 to 1 million metric tons per year, wont reach the market in time to meet the expected uptick in demand ahead of the Dec. 1 European Automobile Manufacturers Association deadline for the selling of products with formulations meeting the ACEA 2012 engine oil sequences.

On the Group III side, Russian and Emirati base stock supplies are entering the European market. Last year, Rosneft began offering Group III base oils from its Yaroslavl, Russia, plant, a 50/50 joint venture operation with Gazpromneft. To date, Rosneft has supplied Group III base oils with viscosities of 4, 6 and 8 centiStoke. Other Russian exports, Group III 4 cSt base oils, are sourced from Tatnefts Taneco plant in Nizhnekamsk and Lukoils Volgograd facility.

Abu Dhabi National Oil Co., fresh off its February distribution deal with Chemlube, is supplying the European market with its Group III base oils. Adnoc produces some 500,000 tons per year at its plant in Ruwais, United Arab Emirates. While the company has secured API SN approval, among others, it has yet to achieve ACEA and European original equipment manufacturer formulation approvals. As a result, Trinder said, these oils are selling at a discount, which puts pressure on pricing for so-called unapproved Group III.

Trinder said things to look out for include some of the planned base oil plant turnarounds this year, as these periods of maintenance always have a slight impact on the market. SK Lubricants 13,300 barrels per day capacity plant in Cartagena, Spain, will go offstream for a period of 35 days starting from early September. The companys planned 20-day period of maintenance on its Indonesian facility in Dumai, originally scheduled for July, has been pushed back to 2019.

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Base Stocks    Business