The arrival of these products was heralded almost as a niche market, appealing only to a small number of blenders who mainly relied on Group I to blend the finished lubricants being produced at the time. Only a handful of blenders experimented with Group II products. They gradually brought these grades into their slate of base oils to be used for specialty lubes designed for the new breed of modern automotive gasoline and diesel engines.

The fact that these grades had to be imported was not lost on the traditional European lubricant industry. Most dismissed these base stocks as specialty or even niche items, used mainly to reduce additive use. They envisioned only a limited future in a market so geared to using heavier viscosity Group I grades to produce the lubricants required in European and export markets.

However, base oil producers in both the United States and the Far East were investing heavily in new production facilities, using technologies that were the forerunners of processes such as Isodewaxing and Isofinishing, introduced by Chevron around 1993. By definition, this meant that the presence of Group II was going to be felt in the source markets to a greater extent than traditional Group I base oils.

Around this time, a number of producers identified the European market as ripe for the inclusion of Group II in the range of base oils commonly being used. As a result, a fundamental shift began as a number of Group I refineries either shut down or received limited reinvestment in ongoing operations.

The fact that no major base oil producer had identified Europe as a production center for Group II was not deemed important because this market was headed for what was known as globalization, moving the production of basic blend components away from existing sources such as Europe to new grounds in the Far East. Forward looking U.S. producers, on the other hand, were quick to identify the decline of Group I and the exponential growth potential of Group II both at home and in export markets, and they seized the initiative by investing huge sums in new facilities for both Group II and III.

Meanwhile, a number of major players such as Exxon and Mobil (independent at that time) and, of course, Shell adopted Group III production within Europe. The underlying premise was that existing Group I base stocks could be used in conjunction with Group III oils to produce the new breed of finished lubricants. The fact that no refiner, with the small exception of two Polish companies, had adapted existing Group I facilities or invested in Group II was not lost on producers who now had a potential surplus of Group II output on their hands.

The current situation within Europe has evolved into one where closures of Group I facilities are continuing with more producers likely to close or sell refineries where base oils will probably be excluded from the slate. This acceleration of closures and fewer Group I operations has opened the door for Group II sellers to fill the void created by the disinvestment in many of the majors prime refineries.

Shells refinery at Stanlow in the U.K was sold to Essar, an Indian investor that almost immediately closed base oil operations after honoring contracts to supply Shell during an interim period. A further announcement by Shell that the Pernis Rotterdam base oil plant would close in about a year reinforced the growing awareness that the days of Group I production could be numbered.

Several other mainland Europe base oil producers are teetering on the brink of relinquishing operations to produce Group I base stocks. While some will continue to exist as refinery units, base oils will be wiped from the slate.

With global Group II suppliers such as the South Koreans and Chevron already active in Europe, and given that a queue of other producers have already targeted Europe, this can only lead to the assumption that Group II as a product line is here to stay, and can no longer be considered a niche or specialty range of products. There are limitations to the range of Group II grades, mostly in terms of producing a higher viscosity blend stock. Many experts say this confirms the need to continue having heavier Group I grades on tap for inclusion in certain types of finished lubricants, such as marine and transmission fluids.

Some refiners are taking the stance of limiting or removing lighter Group I production and are using third-party supplies of Group II grades as substitute materials. Heavier trains producing grades such as bright stock are being retained by some because this particular grade cannot be replaced easily with new light-viscosity Group II and Group III base stocks.

The scene is set for a quantum change in the European base oil arena where the markets will become dependent on imported Group II base oils. They will no longer rely on indigenous production that historically was used locally and also served to cover developing markets with limited base oil availability.

There remains a case for Group I and Group II/III living side by side, particularly where Group I production may become limited with only a few existing producers remaining. There is also the possibility of Group I base oil grades becoming the products in demand with fewer refiners and, hence, fewer sellers providing these grades.