Serra-Holm told Lube Report on the sidelines of the conference that the shift to higher grade base oils in Africa will be driven by demand, supply and regulatory requirements. But penetration of Group II remains extremely limited, so the outlook for Group I is of key importance for the regions blenders.

Industry consultant Geeta S. Agashe, president of Geeta Agashe & Associates LLC, told Lube Report in an interview that original equipment manufacturers recommendations are pushing the drive toward producing lighter viscosity grade lubricants, some of which can only be formulated using Group II or higher base oils.

Africa does not even produce as much Group I as it needs internally, so forget exporting – it has to import Group I base oils, which primarily come from Europe and the Middle East. Now, those European refineries are shutting down, which means that this region is going to be in even more deficit in Group I base oils, said Agashe. That is why I feel like now is a good time for blenders to figure out how they can move to using Group II base oils.

Africa accounts for less than 10 percent of global finished lubricants demand, Serra-Holm said in her presentation, and over 90 percent of the continents demand is concentrated in just eight countries: South Africa, Egypt, Algeria, Nigeria, Morocco, Libya, Tunisia and Sudan. South Africa, which has at least nine blending plants, dominates in terms of lubricant manufacturing capacity as well.

Agriculture is Africas largest economic sector, she pointed out, although some resource-rich countries mainly depend on extractive industries. Manufacturing remains relatively small-scale in most countries though, and Africas market therefore is dominated by automotive lubricants, with commercial automotive volumes amounting to about twice as much as consumer automotive. The vehicle parc is relatively old, too, so this market has lower quality standards and is highly price conscious.

Industrial lubricants are less than 30 percent of Africas lube sales, and are consumed primarily by the petroleum, mining and agricultural sectors. Among the growth opportunities highlighted by Serra-Holm are agriculture, the construction industry, and power generation, which especially will need electrical transformer oils. Another positive driver for lubricant demand is the expected investment in car manufacturing in Nigeria, she added.

Group I oils still dominate the local scene, said Serra-Holm, and except for South Africa, where Group II has entered into automotive lubricants, penetration of Group II is still extremely limited.

That may be staring to change, Serra-Holm later told Lube Report. Price is less of a factor today for Africas base oil purchasers because the prices of Group I and II base oils are roughly equal now. In her presentation, she said the main contenders for replacing Group I will be Group II, naphthenics and blends of these two. Such blends have a very positive outlook, she said, due to the regions high resistance to reformulating. Group II-naphthenic blends can restore much of the viscosity and solvency characteristics that are lost when switching from Group I, she showed, and make reformulating much simpler.

Its clear that if Group I plants keep closing, and investments in Group II capacity keep rising, there is a possibility the current price relationship between Group I and Group II will also change, because at the end of the day it is supply- and demand-driven pricing, said Serra-Holm.

Agashe concurred, noting, In the past, Group I base oils were the lowest priced and Group II base oils were priced higher; but now there is a lot of parity between Group I and Group II.

Agashe, however, reminded that technical education is critical to African blenders shifting to higher grade base oils. We need to educate everyone in the entire value chain, and it is a combined job for the industry, including additive suppliers, lubricant marketers and base oil marketers, as well the relevant government agencies.