Zhang, the Beijing-based companys supply department manager, gave an overview of Chinas Group II/III base oil business.

Ownership of cars in China is booming, said Zhang, reaching 106 million units in 2011. By 2015, he said, Chinese lubricant consumption will reach 8.1 million t/y, of which 3.65 million tons will be engine oils. More focus on the environment and energy conservation will require top-grade lubricants, and this in turn will require higher quality base oils.

Total base oil consumption in China in 2011 was 6.91 million tons. Chinas three giant, government-controlled major oil companies, PetroChina, Sinopec and CNOOC, together supplied 2.75 million tons of base oil; 2.12 million tons was imported; and other, generally low-quality refiners supplied the remaining 2.04 million tons.

Zhang next described the Chinese majors base oil capacity. PetroChinas capacity at seven refineries totals 2.12 million t/y, of which 700,000 t/y is naphthenic and 200,000 is Group II. Sinopecs total capacity at five plants is 1.52 million t/y, all paraffinic, of which 410,000 t/y is Group II/III. CNOOC has 850,000 t/y of total capacity at three plants; 450,000 t/y is naphthenic and 400,000 t/y is Group II/III.

Of the other domestic base oil refiners, said Zhang, only one, Handiyangguang in Hainan, produces Group II base oil, with 300,000 t/y capacity.

Total domestic Group II/III capacity today stands at 1.31 million t/y.

Because 2011 saw a number of new sources of base oil, China experienced oversupply, high inventory levels and lower prices. Group II was cheaper than Group I sometimes, Zhang noted. But base oil imports have continued unabated.

Zhang estimated that about 600,000 tons of the 2.12 total tons of base oil imported into China in 2011 was Group II/III. In the first quarter of 2012, 540,000 tons of base oil were imported.

Zhang offered details on the expansion plans for each of Sinopecs base oil plants. At Yanshan, a new hydrogenation unit is under construction, using ExxonMobil technology. Production is expected in 2013, and the anticipated Group II/III output, totaling 240,000 t/y, is: 2 and 3 centiStoke, 56,000 t/y; 4 cSt, 69,000 t/y; 6 cSt, 51,000 t/y; and 10 cSt, 64,000 t/y.

Sinopecs Gaoqiao plant was upgraded in 2011, and now has 620,000 t/y total capacity, of which half is Group I and half Group II.

At Maoming, Sinopec is adapting to new crude sources and putting in a hydrocracker, adding 250,000 t/y by 2015, which will bring total base oil capacity to around 550,000 t/y.

At Jinan, the upgrading project for its heavy lubricant base stock and bright stock production began in February of this year. Main products to be produced when the project is completed by 2015 include 86,000 t/y of heavy Group II and 41,000 t/y of bright stock.

Were putting more attention to producing better products, including eco-friendly products, Zhang said. Premium base stocks, meeting Group I, II or III standards, will make up at least 95 percent of Sinopecs production by 2015.

And now, he said, Sinopec is committed to internationalization. We have built our first lubricant [blending] plant outside of China in Singapore, and Sinopec plans to trade base oils through its Singapore company, importing base oils for domestic blending plants and exporting the production from its Shanghai and Maoming refineries.