GTL to Challenge Premium Base Oils


HOUSTON — Gas-to-liquids base oils may be a long time coming to the lubricants industry.

They still have obstacles to overcome, such as large capital requirements and weak demand for their attributes. In fact, as the National Petrochemical and Refiners Association heard last week, another decade may pass before gas-to-liquids (GTL) products claim a significant portion of the base oil market.

But there is little doubt that GTL stocks are coming, a panel of speakers agreed. And when they arrive, they will pose stiff competition for Group II and above oils.

Theres no question GTL is going to be the end-game, the workhorse of the industry, said PetroTrends Inc. President Thomas F. Glenn, becauseit’s going to have the required performance characteristics andit’s going be the lowest cost.

Efforts to process natural gas into fluid petroleum products began more than 100 years ago, according to Conoco Inc. Gas to Liquids Manager Jim Rockwell, one of four speakers participating in a Nov. 9 session at NPRAs Lubricants and Waxes Meeting here. As he and others noted, technologies have been developed to the point that they produce base oils with very high performance characteristics: low volatility; extremely low, even undetectable levels of sulfur and nitrogen; very good low-temperature properties and a viscosity index of up to 155.

Speakers also agreed that interest in GTL is higher than ever. One reason is the steadily growing volume of natural gas reserves, now up to 900 billion barrels of oil equivalent. At least 60 percent of that volume is in locations too remote to be harvested economically as gas. The other major impetus is the growing demand for clean fuels. Speakers agreed that synthetic diesel fuels will be the primary product of GTL plants, although those plants will have substantial base oil byproducts.

Obstacles to the introduction of GTL remain. GTL plants require twice as much capital investment as traditional refineries, Rockwell said. At the same time, demand lags for the characteristics offered by GTL. All speakers agreed that GTL base stocks are generally superior to Group II-plus and Group III oils and comparable to poly alpha olefins. But as Kline and Co. Director of Petroleum and Energy Geeta S. Agashe noted, demand for the latter three categories totaled less than 20,000 barrels per day last year.

Just one large-scale gas-to-liquids plant could probably meet that demand, and still have some product left over, she said.

Glenn predicted that GTL base stocks will enter the market around 2005 or 2006 but will not claim a significant portion of the market until after 2010, when they begin the growth phase of their product cycle.

Agashe believes that supply of GTL base stocks will overwhelm demand for premium oils. By 2015, she estimated, the supply of GTL base stocks will grow to 200,000 barrels per day, nearly matching the combined demand for Groups II, II-plus and III, as well as PAOs.

The oversupply will force GTL stocks to move down the category hierarchy to compete against Group II and every category above. As a precedent, she cited the fact that Group III stocks today compete at Group I levels in some regions.

Glenn predicted that Group I will be the one category not to compete with GTL. By the time GTL enters its growth phase, he said, Group I base stocks will already have lost market share, surrendering the automotive sector to Groups II and above.

Group I is going to be a different market then than it is today, Glenn said. Its going to be used mostly in applications where theres a demand for heavier viscosities and greater solubility. GTL is a light and medium product with less solubility so it really wont be able to compete with Group I. Besides, are GTL producers really going to want to depress their entire price structure just to capture just whats left of Group I?

Agashe maintained that the biggest question mark for GTL is whether some of the prospective investors in the technology decide that it is too competitive. She noted that some of the companies with plans for GTL facilities already produce Group II, III or IV base oils.

The key question, she said, is will the mega-majors with bets on both GTL and traditional technologies [ExxonMobil, Shell, BP and ChevronTexaco] cannibalize either of their technologies?

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