Paraffinic base oil accounted for 50.6 million barrels of 2011’s total output, climbing 2 percent over 2010. Naphthenics surged to 11.3 million barrels, a whopping 7.6 percent higher than 2010.

For both, it was a far cry from the dark days of 2009, when paraffinic refiners could muster only 45.9 million barrels and naphthenics sank to a 20-year low of 9.1 million.

“2011 was a stellar year for base oil – at least forthe first nine months,” said Yvonne Schappell, director of lubes marketing at Paulsboro Refining Co., which has 11,000 barrelsa day of API Group I capacity in Paulsboro, N.J. “We saw historical margins,we ran smoothly all year,we hadno production issues, and in fact were able to help out those who did. At times we couldn’t make base oil fast enough.”

Chevron’s Brent Lok, manager of base oil marketing and production technology in San Ramon, Calif., tended to agree. Despite some issues at the company’s 20,000 b/d Group II facility in Richmond, Calif., “it was a good year in general. We did not see any major upsets and we didn’t see severe shortages; things were just tight,” he said. “Most blenders could get their product out. Also, we saw China and India growing again, taking more supply. Then Shell’s GTL was expected to come onstream and maybe loosen up Group III availability, but that never happened – it just got soaked up immediately.”

Buyers and sellers alike recalled a parade of outages, allocations and sales controls during the year. U.S. refiners American Refining Group, Calumet, Chevron, ExxonMobil, HollyFrontier, Motiva and San Joaquin were among those who had operating issues in the first half, as did northern neighbor Petro-Canada. Supply logistics also were hindered by history-making floods along the Mississippi River in May. The supply scene righted itself at last in the final quarter, just after the seasonal lull kicked in.

“Stuff was tight, and it seemed there were a bunch of refinery turnarounds. Motiva had a base oil unit that was causing problems and that put a real crimp in the Group II market for a while,” said the president of one large lubricant blender in the Midwest, speaking anonymously for competitive reasons. “It took substantially longer to get deliveries, we were on allocation repeatedly, and it was hand-to-mouth at times. Things were cramped and you saw long lead times out there.”

“Both Group II and III were affected, and we just couldn’t supply everything we had demand for,” echoed a base oil marketer in the Gulf Coast region, also speaking on condition of anonymity. “The year could have been stronger if we’d just had material to sell.” This executive noted that a couple of maintenance turnarounds are under way now, with others coming soon, which may keep things tight in coming months.

EIA also released figures on U.S. imports and exports.

• Except for a dip in 2009, lubricant base oil exports have surged since 2001, and reached 24.9 million barrels in 2011, the agency reported. This means a solid 40 percent of U.S. base oil production was shipped out in 2011.

• On a net basis, exports took all the gain in U.S. base oil production, and then some. Total domestic output rose by 1.8 million barrels in 2011 over the year before, and exports ate 2.3 million barrels more.

• Imports of base oil rose, with 10 million barrels landing on U.S. shores in 2011 versus 9.6 million the year before. South Korea, with 3.9 million barrels, and Canada (3.5 million) are the two largest sources of imports.

What goes out differs from what comes in, reminded Mike Burnett, the Brandon, Miss.-based director of international base oil sales at Renkert Oil. “Exports have been rising due to the fact that we’re producing a lot of Group II and a lot of naphthenics, more than the rest of the world, and both are experiencing a lot of foreign demand. We see U.S. naphthenics going to Asia and Europe, and our Group II going mostly to Europe,” he said.

Most of the 2011 growth in U.S. naphthenics production, he added, can be laid to Ergon’s expansion of its Vicksburg, Miss., plant, now at 22,000 b/d. “Some of this volume definitely is going for export, as it was planned and created for.” Burnett also saw good demand in Europe for heavy Group II, as a replacement for bright stock in color-sensitive process oil applications.

At year end, demand began to flag a bit, said Patrick Gribbin, vice president, lubricants and specialty products at Group I refiner HollyFrontier, “but it was an extremely good year for us in general. We benefitted from a good operating environment, and had an additional boost from the spread between West Texas Intermediate crude and Brent.” His company’s 9,500 b/d refinery in Tulsa was dealt a strong hand when WTI suffered a price-crushing glut at the wellhead in Cushing, Okla.

Looking ahead, sources said two events bear close watching. First, Chevron is moving towards a planned turnaround at Richmond this year, in an “undetermined” time frame. The turnaround will involve a catalyst changeout in the hydrocracker, but will be delayed until the catalyst is nearly spent — “which isn’t happening yet, it’s still going,” the company’s Lok assured.

Second, buyers and sellers need to keep a sharp eye on vacuum gas oil supply, advised base oil and refining industry consultant Terrence Hoffman, Fair Oaks Ranch, Texas. VGO is a key feedstock for many base oil producers, but availability is being hobbled by the closure of a large refinery in St. Croix, Virgin Islands, which formerly supplied the United States.

“St. Croix was a huge VGO producer, and its absence will tighten up the VGO market,” Hoffman cautioned. “Base oil prices are really driven by VGO availability and volumes, and you need to watch VGO carefully.” Crude oil prices are always felt in base oil costs, “but the premium VGO gets over West Texas crude can be expected to put more upward pressure on base oil prices.” VGO last week was at a $32/barrel premium over WTI, he added.

Despite these rumblings, the outlook for 2012 is perking up, said Gribbin at HollyFrontier. “We’re off to our best start in the last five years,” he declared. “We may be seeing some pent-up demand come through from when folks held off on buying at year end, but I sure hope it lasts.”