If you’re wondering how much gas-to-liquid and Group III base oil is arriving in the United States from the Middle East, the answer is “plenty.” Data on imports of lubricant base oils published recently by the federal Energy Information Administration show that the U.S. hauled in more base oil in the first six months of this year than it did in the same period last year. And imports from two new Middle East sources accounted for essentially all of the growth.
Total U.S. imports of base oil in the year’s first six months rose 20 percent, to hit a total 5.9 million barrels, the EIA data show; that’s about 32,000 barrels per day. In the same period of 2011, imports of base oil were 4.9 million barrels, or 27,000 b/d.
Credit the spike in base oil imports to two rookies to the global market. The first is Qatar, home to the Pearl gas-to-liquids joint venture of Shell and Qatar Petroleum, which currently has capacity to make 3,000 b/d of API Group II and 11,000 b/d of Group III.
Last November, Qatar sent its inaugural shipment of 166,000 barrels of base oil to the United States, accompanied by great fanfare. Shell followed that up with four shipments from Qatar to the United States in the first six months of this year, totaling 757,000 barrels of base oil; July saw the arrival of 211,000 more. That’s well over a million barrels of base oil in all, or better than 25 percent of Pearl’s nameplate capacity.
So far, all of the GTL material is being consumed by Shell itself, and is not posted for sale.
Meanwhile Bahrain, home to the Neste Oil-Bapco joint venture that started up last fall, sent its first 67,000-barrel cargo to the United States in January. It has followed up steadily since, landing a total 404,000 barrels of base oil in the year’s first six months, and another 60,000 barrels in July. Neste-Bapco, with 8,000 b/d of Group III capacity, is located in Sitra, Bahrain.
Together, these two Middle East countries accounted for 20 percent of the imports in first-half 2012-essentially all of the volume increase.
The additional volumes have been absorbed easily, and not been disruptive to the market, believes Gerry Jackson, vice president of Renkert Oil in The Woodlands, Texas. Renkert, which is Neste Oil’s exclusive distributor of Group III for independent blenders in North America, is having very little difficulty in placing the new barrels with customers, he said.
For one thing, we started seeding the market with Group III from Neste’s Porvoo, Finland, refinery here about a year before the Bahrain plant opened, Jackson told Lube Report. Also, Neste’s material has the advantage of having all the European top-tier motor oil approvals, plus approval for making General Motors’ Dexos oils.
He pointed out that the Bahrain Group III base oil came to market around the same time that Motiva ended production of its Group II+ base oil. Motiva had given customers 15 months advance notice that it would stop making its Star 5 Group II+ 130 viscosity grade at the end of 2011-which it did-in order to improve operating efficiencies at its refinery in Port Arthur, Texas, and make more Group II base oils.
That left a nice gap in the market that the Neste base oil could slide into, Jackson observed. Timing can be either advantageous or disadvantageous, and I’d say in this case Motiva’s exit from Group II+ was advantageous timing.”
Despite the inroads made by the Middle East producers, Asia remains by far the largest source of U.S. base oil imports, especially South Korea. That country’s refiners, including S-Oil and SK Lubricants, also saw growth and sent around 2.2 million barrels of base oil to the United States in the year’s first half, versus 1.8 million barrels in first-half 2011.
Base oil imports from South Korea are virtually all Group III and Group III+, said Beth Fields, sales manager for Houston-based SK Lubricants Americas. She said that U.S. buyers seemed to have sopped up the Middle East barrels pretty quickly, with little impact on SKs volumes. The GTL base oils arrival coincided with the end of Motivas Star 5 Group II+, and that seems to have balanced out demand without much impact on the other Group III suppliers.
Fields noted that SK opened its fourth Group III plant in May, a joint venture with JX Nippon Oil in Ulsan, South Korea, and is building a fifth with partner Repsol in Cartagena, Spain. SK has been delivering Group III to the United States since 1996, and since 2001 has ramped up shipments and added storage terminals around the world to meet demand.
Our advantage as a Group III supplier, Fields added, is that even at times when the overall base oil market seems to be heading south, demand for Group III is always growing. Theres a constant positive stream of upgrades that plays to Group IIIs strengths, like the new GF-6 and PC-11 engine oils, and the OEMs who are moving to SAE 0W engine oil grades. As well, each model year brings more vehicles that require Group III usage.
After South Korea, the next-largest source of imports was Canada, with 1.4 million barrels from January through June. The leader here is Petro-Canada, which makes Group II and III base oils at its 15,600 b/d refinery in Mississauga, Ontario.
Other significant volumes of base oil imports in the years first half came from Taiwan (225,000 barrels), Indonesia (207,000 barrels) and Venezuela (176,000 barrels).