Despite the fact that its 10 base oil refineries are running below capacity, PetroChina will need to import 500 neutral and API Groups II and III base oils over the next three years, Yang Junjie, vice chief engineer of PetroChina Lubricant Co., told the ICIS Asian Base Oils & Lubricants Conference here in June.

PetroChina Lubricant Co. has 13 blend plants and 10 base oil refineries, three research facilities, and six sales distribution centers, Yang said. We upgraded all of our original 13 [lubricant] brands into Kunlun in 2003, and the whole company adopted the lubricant logo.

PetroChina Lubricant Co. has a sales goal of RMB 20 billion, and annual sales volumes of 2.4 million tons, including one million tons of packaged lubricants, by 2010, said Yang.

The company has four strategies to meet those goals. First, said Yang, is specialized marketing, based on product line rather than geographic region. Second is market-oriented research and development, with a focus on customer needs rather than top-down company dictates. Third is centralized production, Yang continued. We have built several new plants close to the markets … and we will close some of the old ones. Finally, the company will internationalize its brand, putting more resources into overseas markets, while continuing to focus on the domestic market. We are just starting to promote the Kunlun brand beyond China, Yang added.

Turning to the companys base oil business, Yang said that total capacity at its 10 base oil plants is 2.7 million tons per year, although actual production will be just 1.9 million tons this year. The base oil market is very tight [now]. Refineries are producing diesel, not base oil, he said. Refineries running below capacity is a big issue at PetroChina. This may improve in the future, but refineries now must produce fuel, and cleaner fuels. Plus fuel margins are better [than base oil margins].

Production at PetroChinas Fushun and Lanzhou refineries, Yang said, may be upgraded to Group II quality.

PetroChina is mainly supplying 150 neutral, 150 bright stocks and naphthenic oils to the market. The company anticipates a major focus on naphthenics, Yang said. We have more than 200 million tons of naphthenic crude oil resources in our Kelamay oil field, a 50 year supply.

We still need to buy some base oil while selling, Yang said. He predicted that PetroChina Lubricants will import 10,000 tons of Groups II and II, and 20,000 tons of 500 to 650 neutral base oils this year. That is projected to increase to 60,000 tons of Group II and III and 100,000 tons of heavy neutrals in 2009, jumping to 100,000 and 200,000 tons in 2010.

PetroChina is an open-minded and cooperative company, Yang concluded. We are sincerely looking for long-term strategic partners, at home and abroad.