Middle East Faces Group II/III Shift Choice


DUBAI, United Arab Emirates – With API Group II and III base oil supply growing in the Persian Gulf area, the question remains whether base oil needs in the Middle East and North Africa will evolve to make more use of the supply.

During the 11th ICIS Middle Eastern Base Oils and Lubricants Conference in Dubai on Oct. 15, a panel debated if the region would adopt a new base oil paradigm and take advantage of advances in technology and what form the transition would take. It is a big if, however, and the regions harsh climate is one of the reasons it has not happened.

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There has been a lot of chatter about API Group II and III base oil production coming out of the Middle East Gulf. Neste Oils joint venture with Bapco (Bahrain Petroleum Company) has produced Group III base oils from its plant in Bahrain since 2011, while Shell and Qatar Petroleums gas-to-liquids joint venture at Ras Laffan, Qatar, has been supplying Shells voracious base oil appetite since 2012. By the end of this year, Abu Dhabi National Oil Co.s Takreer is scheduled to begin making Group II and III base oils at Ruwais in the UAE. Luberef, a joint venture between Saudi Aramco and Jadwa Investments, is also set to join the regions party with a Group II upgrade at its plant in Yanbu al Bahr, Saudi Arabia.

So does all this new base oil production signal a sea change in the dynamics of the market in the Middle East and North Africa? The region remains for several reasons a stubbornly Group I market.

Panel participants included Daniel Iannuzzi of Feedco, William Downey Jr. of Novvi, Gerard Heaton of Luberef, Samir Nawar of Petromin and Fredrik Nissfolk of Neste.

The Middle East has access to all types of base stocks and can choose from Group I, II or III, Daniel Iannuzzi said. However, he added, issues like vehicular emissions and fuel economy are less important here than in markets such as the United States, Europe and Japan, though the situation is slowly changing. The GCC (Gulf Cooperation Council) is beginning to raise the bar for formulations.

Nissfolk added that to protect some automobile emissions control technologies required sulfur-free base stocks. For these type of lubricants, (Group) II and III are the best products in this region, he said.

According to Luberefs Gerard Heaton, a number of factors are causing the market here to evolve, including climate change legislation and demands for improved performance and energy efficiency. There is a changing mood, so there will be all types of oil, and for blenders there are choices to be made. They have to look into their own systems, supplier availability and security of supply.

Downey said other factors will also impact the Middle Eastern base oil market, a market which he said will be technically oversupplied with Group II and III base oil. We have learned from other markets that when there is oversupply, it drives the supply push orientation from base oil refiners. That enables OEMs to require higher-performing lubricants and also provides an opportunity for marketers to change the market in favor of higher specification products, Downey said. It takes money, it takes time, but the blurred distinction between products from a cost standpoint creates an opportunity for marketers.

Samir Nawar agreed that supply push is a factor in the region. From what I am hearing from blenders who export to neighboring countries, the trend to use more Group II will be seen in the near future, and it has started, Nawar said. He noted that the cost differences between Group I and Group II products are minimal, which will encourage blenders and accelerate the use of Group II base oil. My opinion is in the next two years you will see a big change that will take place.

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Africa    Base Stocks    Middle East    Region