The deals brought Petronas Base Oil, part of Malaysias national oil company, the highest net-back prices so far, not ideal but acceptable, said Rousmaniere during an exclusive interview here.

Petronas new Group III refinery in Melaka was originally planned to come on stream in May 2008, when base oil demand and prices were at a peak. But the plant did not begin production until November, the absolute nadir, Rousmaniere said. But a baby has no choice when its born. Our first shipment to Europe was in November when [base oil] prices were dropping $100 [a ton] a week and everybodys tanks were full.

Further complicating the refinerys launch, the plant was required to run at 100 percent capacity in order for its technology provider, ExxonMobil Research & Engineering, to provide necessary certifications. From November to January we had to run at 100 percent when everyone else was cutting back, recalled Rousmaniere. We just had to find a place to put the oil.

But now its much better. Now were hardened veterans. We started under intense pressure with no market and full capacity. Now were running at 60 percent, and were practically at a sold-out position. Were contemplating increasing production to 100 percent.

Petronas initially targeted Europe for its high-quality Etro oils, expecting major oil companies there to be a primary market, in addition to Petronas Lubricants International, formed after Petronas acquired Italys FL Selenia. But weve turned our attention 180 degrees, Rousmaniere continued. The whole lubricants and base oil world is flat on its back now, except China.

Rousmaniere attributed Chinas interest in high-end Group III base oils to the countrys growing recognition of the importance of fuel economy. Automakers in China, especially the Japanese OEMs, are going from 15W to 5W to 0W oils. Its driving the rush to Group III base oils in China.

China itself has minimal Group III capacity, and is likely to become a Group I and III market for its higher-quality motor oils, said Rousmaniere.

Despite Petronas new focus on China, the company isnt putting all its eggs in one basket, Rousmaniere insisted. Japan is a big 0W-20 market, so its a big target for our oil.

SK Energy and Petronas have created a new tier of base oil, Rousmaniere continued, with viscosity index above 130. You can make a 0W-20 without PAO using a Group III with V.I. over 130, he said, so China isnt our only target. Japan is very important.

And if Shells GTL arrives, that will further support development of the market for the base oils that are now dubbed Group III+, Rousmaniere said.

China is hungry for [high-end] base oil and for the technology for using it. Our marketing person is always accompanied by a technical person, Rousmaniere said. We do seminars on base oil technology in China. Its an important selling point for us. Were the only Group III company with fully Chinese-speaking technology capability.

Rousmaniere noted that S.K. Lee, Petronas Base Oils new manager of technology, is a native Chinese speaker. Lee replaced Eng Kiang Ong, who retired June 1.

When Rousmaniere joined Petronas three years ago, he recalled, he predicted that by 2015 our market will be China, China, China. Its 2009 and were already there.

When will Petronas return to 100 percent capacity? Rousmaniere wouldnt say, but theres a plan in place for a possible refinery expansion in five years.