One industry analyst says some Group I plants in the Middle East and Asia will survive, but warns they will need to work harder to do so. Solomon Associates Stephen Wright said others will close or convert to Group II or III.

Many Group I plants will survive and profit – some by enhancing their capabilities, some simply by adjusting their product slate to better meet market demands, Wright said in May at the Base Oils and Lubricants Middle East Conference in Bahrain. But some will close due to loss of market or high operating costs.

Until recently, the Middle East was left out of the global base oil supply shift from Group I to Group II and III stocks. At the start of last year, the region had 11 base oil plants, all of them making Group I. Then large Group III plants opened in Qatar and Bahrain, and suddenly observers were calling the region a hub of Group III supply.

Widening his view to consider the entire continent, Wright noted that most new Group II and III plants have been located in Asia and that more projects are underway. The new projects create a surplus of base oil supply, he said. Hence, there appears to be pressure on Group I producers.

In Europe and North America, this dynamic has led to the closing of numerous Group I plants. Solomon, a consulting firm based in Dallas, Texas, U.S., predicts the same will happen in the Middle East and Asia, but he emphasized that some Group I facilities will keep operating. Wright described typical configurations for Group I plants, as well as different designs of Group II and III facilities, and argued that each has advantages and disadvantages. Group I plants, which refine by solvent extraction, make light- and medium-viscosity base stocks generally considered inferior to Group II and III for key lubricant applications. However, they produce bright stock and other heavy base oils, as well as wax – none of which are made at Group III facilities. Without practical alternatives, Wright said, the market will pay enough for them to ensure their continued production.

Group I plants can be converted to Group II and III one of two ways – either by installing a lube hydrocracker or by switching feed stocks from vacuum gas oil to heavy bottoms from fuel hydrocrackers. Both approaches are relatively cheap in terms of capital investment and allow the plant to produce higher grades of light and medium base stocks while still making Group I heavies and bright stock.

Wright predicted that some plants will pursue each of these options. Some Group I plants will remain in operation, but it will become more important than ever for them to operate productively and efficiently.

Well-run solvent plants are competitive with lube hydrocracker plants, he said, but they must extract everything of high value from the feed stock. They also must control operating expenses. Any high-cost plant will be in danger of closing, regardless of the technology it uses or its location.