Pale Oil Demand to Outstrip Supply

Share

HOUSTON – In light of current market conditions, an Ergon executive said, future naphthenic demand is a larger unknown than usual, but despite the uncertainties, he predicted that todays global naphthenic surplus will become a shortfall by 2012.

Per Klintstam, president of Ergon Europe/Middle East/Africa in Waterloo, Belgium, told the NPRA International Lubricants and Waxes meeting earlier this month that worldwide demand for naphthenics, particularly for use as process oils, will outpace supply by more than 380,000 metric tons per year by 2012.

Today there are numerous sources of low viscosity index, high solvency naphthenics, Klintstam said, including North and South America, Africa, Australia, China and the North Sea. These oils have three primary markets: as electrical oils for transformers; as process oils for the rubber industry; and as base oils for metalworking fluids and industrial lubricants.

The trends in each of these primary markets will drive growing demand for naphthenics. We can expect 5 percent annual growth in the installation of electricity distribution capacity in the mid term, driven by emerging markets, said Klintstam. In addition to new capacity, there are some replacement needs in Europe and North America.

For process oils, the biggest impact is the replacement of aromatic oil in rubber, and those opportunities are significant. By the year 2010, that replacement opportunity will total 301,000 metric tons per year in the Americas, 256,000 metric tons in Europe, the Middle East and Africa, and 314,000 metric tons in the Asia/Pacific region. While some other high-volume applications like printing inks and anti-caking oils are flat to declining, Klintstam continued, polymer-related applications will grow due to their solvency requirements.

For base oils, the shift from API Group I to Groups II and III, most notably in Europe, will require solvency for industrial lubricants, additive packages and marine oils, and this creates opportunities for high-solvency naphthenics. In addition, the reduced availability of bright stock will open new markets for heavy naphthenics with mid-VI characteristics.

Klintstam projected demand growth by segment and region from 2008 to 2012 as follows:

Naphthenic Demand by Segment and Region, 2008-2012
in metric tons per year

2008

2012

Percent change

Process Oils:

Americas

590,000

900,000

+53%

EMEA

170,000

360,000

+112%

Asia/Pacific

295,000

560,000

+90%

Base Oils:

Americas

330,000

340,000

+2%

EMEA

180,000

220,000

+22%

Asia/Pacific

195,000

235,000

+21%

Electrical Oils:

Americas

360,000

370,000

+4%

EMEA

250,000

300,000

+20%

Asia/Pacific

470,000

570,000

+21%

Source: Per Klintstam, Ergon Europe EMEA

Focusing just on regional demand, Klintstam added, from 2008 to 2012 overall demand for naphthenics in the Americas will rise 26 percent to 1.61 million metric tons. In Europe, the Middle East and Africa demand will climb 47 percent to 880,000 metric tons. And in the Asia/Pacific region, demand will increase 42 percent to 1.365 million metric tons.

But what about supply? Today, said Klintstam, despite regional imbalances, global supply exceeds demand by 375,900 metric tons per year. But by 2012, that picture will reverse, with a global deficit of 384,100 metric tons per year.

Naphthenic Supply by Region, 2008-2012
in metric tons per year

2008

2012

2012 Surplus/Deficit

Americas

1,600,000

1,850,000

241,000

EMEA

550,000

550,000

(331,400)

Asia/Pacific

1,070,000

1,070,000

(293,700)

Totals

3,220,000

3,470,000

(384,100)

Source: Per Klintstam, Ergon Europe EMEA

The biggest challenges ahead, Klintstam concluded, include reduced availability of totally wax-free crudes. Naphthenic producers will have to deal with dewaxing. Product availability in the right location will be a growing issue. And finally, Europes REACH and other chemical registries will present obstacles and opportunities for producers and formulators alike.

Related Topics

Market Topics