Group I Supply Worries Arise in Africa


CAPE TOWN, South Africa – While Africas base oil market remains focused on API Group I base oil, it is not immune to pressure caused by the worlds oversupply of Group II oils.

That was the conclusion of panelists at the ICIS African Base Oils and Lubricants Conference held here in early November.

The panel topic was The Bigger Picture: Assessing Group I Base Oil Supply on a Global Level. Participants included John Fitton, director of technical services for CPS Chemical; Nicholas Gill, senior base oils trader for Chemlube SA; Herbert Fruhmann, a market manager LUB for Nynas; and Alexander Brinckman, sales manager for Hocem Oil Chemical.

Fruhmann said global Group I supply cannot be discussed on a regional basis because any discussion needs to consider developments in markets around the world.

We need to take into account the coming onstream of new Group II base oil refineries that are putting out volume in the market. There is also a lot of supply coming onstream, and that is putting pressure on Group I, said Fruhmann. I think in a few years we are going to see more Group I shut down, and more higher or premium base oils will come onstream. But we can’t do everything with Group II.

Fitton agreed that there is oversupply of Group II but cautioned that nobody knows how long that situation is going to last. For Gill, the oversupply of Group II base oils will have definite impact in West Africa because the Group I supply source will continue to dwindle.

A lot of West Africa [blenders] source their base oils from Russia, and it is very easy for us to project the behavior of the western Group I base oil refineries, but it is less clear how Russian Group I base oils refineries will react to this continued oversupply. And that will be probably be the case of Group I base oil demand we see in West Africa, said Gill. If that goes on, at some point there will be difficult times, or there will a much quicker process of reformulating and adapting new technology and using available base oils.

For East Africa, Gill said there will always be competition between Dubai, Iran and Russia for the Group I base oil market. He noted that most of East Africa will continue to import Group I base oils over the next few years.

Brinckman said the critical question for stakeholders is, whether Group I base oils can compete with Group II and Group III refineries, and the answer is they cannot.

However, he cautioned that much of the Group I traded internantionally is coming out of Russia after the closure of refineries with Group I base oil plants in Europe and South Africa. We have heard so much of European refinery closures, but we have not heard about any Russian refineries. As far as I know, there are no plans for closure of any Russian refineries, said Brinckman.

Related Topics

Africa    Base Stocks    Region