Synthetic Base Stocks Demand Growing


European demand for lubricants may be flat, but the regions demand for synthetic base stocks is forecast to rise at roughly 4 percent per year through 2022, thanks to increasing demand for higher quality finished lubes, an industry consultant said last week.

Although synthetic base stocks make up a small percentage – around 6 percent or 7 percent – of the global finished lubricant industry, it is an attractive segment because of the tight value and growth, Sharbel Luzuriaga, project manager at Kline and Co., said during a webinar Wednesday.

Kline projects that European PAO demand will increase at a compound annual rate of approximately 4.5 percent through 2022. API Group III oils are expected to grow at just under 4 percent per year over the same period, and synthetic esters will increase at a rate of about 2 percent.

Synthetic base stock appetite is growing around the world because original equipment manufacturers and end users of finished lubricants are raising the performance bar for lubes used in many applications. The pace of growth varies for different types of synthetic base stocks because some are favored more than others, Luzuriaga said.

While overall synthetic lubricant base stock demand will grow in line with growth in synthetic lubricants, growth by individual product categories will be higher or lower, depending on inter-material competition, he said during the presentation.

Globally, Group III will see the strongest demand increase due to increased availability and pricing advantages over other synthetic base stock options. Kline distinguished between Group III+ stocks, an informal category recognized by many in the industry for Group III oils with viscosity index of 130 or more. Group III oils are defined as having VI of at least 120.

Group III+ volumes have ballooned the past decade with the opening of three plants – the Pearl gas-to-liquids joint venture between Shell and Qatar Petroleum in Ras Laffan, Qatar; a joint venture between SK Lubricants and Pertamina in Dumai, Indonesia; and Adnocs plant in Abu Dhabi, United Arab Emirates – which together account for more than 90 percent of global Group III+ capacity, which is roughly 2 million metric tons per year. Luzuriaga said these oils have begun to compete against other Group III oils, for which global capacity is approximately 5 million t/y. PAO capacity is around 1 million t/y, though Luzuriaga emphasized that this does not represent the volume actually produced.

Group III and Group III+ oils are used primarily in passenger car motor oils, Luzuriaga explained, while globally the largest portion of PAOs gets used in industrial lubricant applications. Nevertheless, the amount of Group III used in industrial lubes – 400,000 t/y – still exceeds PAO use – 200,000 t/y – due to the fact that Group III supply is much greater.

It is anticipated that consumption of high viscosity PAOs will grow due to growth in industrial applications, Luzuriaga told attendees, adding, High-viscosity applications are an area of focus for PAO suppliers.

Group III is also the synthetic base stock most used in heavy-duty motor oils, with 300,000 t/y, significantly higher than 150,000 t/y and 100,000 t/y for Group III+ and PAO, respectively.

One area that Group III base oils do not rule is passenger car motor oil applications. Group III demand for that category sits at roughly 700,000 t/y, compared to 750,000 t/y for Group III+ and 200,000 t/y for PAO.

SK, including the companys joint ventures in South Korea, Indonesia and Spain, leads the Group III market, holding nearly half of the worlds Group III capacity. S-Oil and Neste follow behind with roughly 20 percent of global capacity each.

Shell has 50 percent of global Group III+ capacity, followed by ADNOC, with approximately 25 percent, and Pertamina, with around 20 percent.

Roughly 90 percent of all PAO supply is held by four players: ExxonMobil, Ineos, Chevron Phillips Chemical and Lanxess. Kline did not provide specific figures.

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