David Adams, senior base oil trader for Optima Energy, Geneva, Switzerland, agreed that Nigeria is a very price sensitive market. The last drop of Group I that will come off the refineries will go to Nigeria, he added.

Mary Mwangi, special projects manager for KenolKobil Kenya, concurred, There are a lot of old cars in East Africa, and they need heavier oil. There are a lot of challenges to move from Group I to Group II, but there is light at the end of the tunnel. Ilozue added that there is no justification for shifting from Group I to Group II at the moment because a lot of people are not convinced that Group II will give them better performance.

Europe is leading the pack in closing Group I refineries. In 2015, major Europe oil producers announced the closure of Shell-Pernis, Netherlands (370,000 tons/year); Total Gonfreville, France (480,000 t/y); Colas Dunkerque, France (290,000 t/y); and Nynas Hamburg, Germany (165,000 t/y).

The trend is the same in Africa. South African Oil Refinery stopped production of Group I base oils in July 2014. And the only remaining Group I refinery in sub-Saharan Africa, Durban-based Sapref, shut down for maintenance in May and has not restarted.

This production rationalization will push major Group I producers with their own lubricant production to focus mainly on production for captive use, said Thomas Norrby, senior technical coordinator lubricants for Nynas. In a presentation at the Argus African Base Oils and Lubricant Conference in Johannesburg, South Africa, in May, Norrby added, Product offerings will no longer be optimized for the needs and requirements of industrial lubricants.

However, while Group I capacity has declined, there are major global expansion of Group II and III capacities. Consequently, the shrinking of Group I base oils capacity leaves producers with one option: either to protect their margins or expand production.

Naphthenics to the Rescue?

While blenders in sub-Saharan Africa continue to seek new ways to deal with the Group I decline, there is a sense that naphthenic base oils could be viable alternatives. Norrby emphasized in his presentation that the Group I rationalization will result in a solvency and viscosity gap in the market. Naphthenic oils can fill part of that gap, he said.

Norrby introduced a naphthenic base oil product that he described as a Group I replacement. It is not a traditional Group I because we are a naphthenic producer, so it has more of the naphthenic qualities. They are naphthenic blends, actually, with other things you can find in the market, Norrby said.

While Norrby noted that Group II and III paraffinic oils are excellent base stocks for formulating modern engine oils, he argued that they display lower solvency compared to Group I oils, which is an important property in most industrial lubricants because it affects the oils ability to dissolve additives and deposits. Therefore, the shift from Group I to Group II and III paraffinic oils will pose challenges to industrial lubricant formulators, he said.

He explained that the solvency of naphthenic blends can be tailored to the application by matching the aniline point of the Group I oil being replaced. Consequently, Formulations dont need to change, and the filters, seals and gaskets dont need to change because the oil presents the same sort of chemical profile to the system.

Norrby said the first application Nynas considered was industrial hydraulic fluids because they comprise 70 percent of industrial lubricants. Also about 70 percent of Group I is used in industrial products today, so that is where the solvency and viscosity gaps are showing up.

Therefore, Norrby argued, The ongoing shift in capacity will generate availability issues for heavy neutrals and bright stocks. Future technical needs for high viscosity and solvency can be met by naphthenic base oils.

Naphthenics Spark Debate

Norrby claimed that some of the qualities of naphthenic base oils that make them viable alternatives to Group I include wide applicability in industrial lubricant formulations, similarity to Group I oils, high degree of blending flexibility, readily available tailor-made blends and superior low-temperature performance. He emphasized that available naphthenic blends closely match the kinematic viscosity and aniline point of a representative range of solvent neutral Group I paraffinic base oils.

According to Norrby, the use of naphthenic blends would allow industrial lubricant manufacturers to maintain key properties of their products and allow for easy reformulation. Consequently, there is tremendous growth potential for naphthenic base oils for such applications such as metalworking fluids, grease, hydraulics and gear oils.

Norrbys presentation was met with mixed reviews by players in the African lubricants market. For instance, Nick Gill, base oil trader for Chemlube, Geneva, Switzerland, told LubesnGreases, he doubts that naphthenic base oils will be able to replace Group I base oils in Africa.

If you are trying to improve the standard of base oil coming into [countries such as] Nigeria, naphthenic base oil is not the answer, he said. In Nigeria, for example, 90 percent or more of base oil and lubricants go into the automotive sector, he said. Naphthenic base oils by their nature have low viscosity index [while the automotive market needs oils with] high viscosity index that will produce good quality automotive lubes.

Lubabalo Bethela, business development manager for Orbichem South Africa, partially concurred, saying that while naphthenic and paraffinic base oils can compete in certain applications, one or the other will always have an advantage in specific areas. For example, he said. They can both be used as transformer oil, but naphthenic base oil does it better. For automotive applications, naphthenic base oils could be used, but paraffinic base oil will be better.

Richard Mugambi, lubricant sales manager for Gulf Energy Kenya, concurred, The inherent challenges of naphthenic base oils given their low viscosity index restrict them to specialized applications in cutting oils and transformer oils. Unless this is addressed, their universal usage will be a challenge.

On the other hand, Andrew Twsai, Sasol South Africas manager key accounts, said that both naphthenic base oils and paraffinic Group I are closely related. Naphthenics should be able to replace paraffinics, especially in industrial applications.

Naphthenics Challenges

Nynas Norrby said the continuing decline of Group I capacity across the world greatly reduces the competition for naphthenic base oil. I think for anyone who knows anything about formulation, solvency and so on, Group II is a very limited alternative for industrial products. If they must use Group II, then they will have to buy some other naphthenic oil to improve solvency. We have a lot of discussions like that with additive companies.

He added that as the oversupply of Group II continues, the lubricant industry will have to figure out how to deal with it by reformulating, making other blends or blending with ethers or naphthenics. Regardless, he said, naphthenic base oils are an alternative that will be in the market permanently.

However, pricing remains a critical challenge for any Group I replacement product in Africa because most of the continent is price sensitive. A-Z Petroleums Ilozue emphasized that there must be price justification to achieve any modicum of success in the shift from Group I base oils.

In response, Norrby said, We are aiming at matching Group I prices; otherwise it wont be a viable replacement. The price must match Group I, or it will make no sense.