Commissioning will occur over the next year at the Shell-Qatar Petroleum Pearl GTL project, Claxton said. Shell executives have predicted the plant will reach full capacity by early 2012.

The equivalent of a 260,000 barrel-per-day refinery, the completed project in Ras Laffan, Qatar, will produce about 110,000 b/d of GTL fuels and about 30,000 b/d of extremely high quality base oils. The base oil plant includes two identical 70,000 b/d trains, providing supply reliability.

API Group III+ base oils (4 cSt and 8 cSt) will make up 23,000 b/d of Pearls output, with 3 cSt Group II+ making up the remaining 7,000 b/d.

GTL base oil manufacturing is the same as any other lube plant that hydroprocesses, Claxton continued, using similar equipment and requiring similar capital expenditures. However, for a shared fuels-lubes hydrocracker using hydrocracker bottoms, costs are lower, but that requires a good waxy lube crude, like a waxy GTL.

Because GTL base oils start with linear paraffins as feed, GTL provides higher yields and higher viscosity index relative to other base oil feeds, said Claxton, plus better volatility characteristics due to absence of aromatics. The GTL feed is 100 percent paraffin, while vacuum gas oil feeds from the best Asian crudes, such as those from Indonesia and Malaysia, are 60 to 70 percent paraffin. VGO feeds from the best Middle Eastern crudes are about 50 percent paraffin, while those from the best European or U.S. crudes are only about 30 percent.

The high paraffin feed requires less severe processing, resulting in higher yields at higher viscosity index. Consequently, Claxton said, the operating cost for GTL base oils is lower relative to traditional base oils. How much lower? The size of the advantage depends on how waxy the crude source is, but a low-wax crude could be 10 per cent disadvantaged.

Claxton offered a post-Pearl forecast of global base oil capacity:

About 60,000 b/d of new capacity will come on stream over the next 36 months, Claxton said, all Group II or III quality. These are the Shell-Qatar GTL plant, Bahrain-Neste and Takreer-Neste Group III projects, and, in China, Sinopecs Yanshan and CNPCs Dalian projects.

With overall capacity predicted to be fairly constant, she continued, new plants will be offset by Group I shutdowns. The oldest and least efficient plants will shut, and they are all Group I. As a result, Group I will slide from 62 percent to just about half of the market in 2015.

Close to half of all base oils go into engine oils, Claxton said, but base oils for many applications, including engine oils, dont need high VI, low volatility or improved viscometrics.

As a result, all refiners, from Group I to III+, will abandon the historical model under which every refiner tried to sell base oil into every sector, including transportation oils, industrial oils and process oils.

Instead, said Claxton, refiners can specialize based on product quality strengths. The high-VI producers will target the premium markets, including 0W and 5W premium engine oils, premium industrial oils and white oils.

Group II is a saturates play, Claxton said. Group II producers can specialize in premium heavy duty engine oils and standard passenger car oils, premium and standard industrial oils, and process oils that favor saturates over solvency.

And everything else is suited for Group I, she continued. They can specialize in standard transportation oils, diluent oils for standard fluids, standard industrial oils and process oils that favor solvency over saturates, plus bright stock and waxes.

Under the GTL-and-Group III+ model, Claxton concluded, refiners specialize and align with market sectors consistent with their processing strengths.