The Americas base oils industry is moving strongly into Group III base stock use in 2018 as new vehicle engines will require more of the light viscosity oils. Based upon this growing need for light viscosity base oils, 2018 will see additional Group III enter the Americas base oil market in both production and commercial presence according to Judith Taylor Senior Editor Manager ICIS in her report AMERICA'S BASE OILS INDUSTRY MOVES INTO INCREASING GROUP III USE.
According to Taylor, Petro-Canada – located at Mississauga, Ontario, Canada, and acquired by Group I producer HollyFrontier in early 2017 – is now posting its base oil prices, broadening its position in the Group III production space for 2018. The Petro-Canada Lubricants plant is the largest producer of base oils in Canada with 15,600 bbl/day of lubricant production capacity, and until 2017 has been is the only North American producer of Group III base oils. With the addition of the Petro-Canada Lubricants business, HollyFrontier is now the fourth largest lubricants producer in North America with a capacity of 28,000 bbl/day, or approximately 10% of North American production.
Calumet Specialty Products, commonly known by Calumet in its Group I and Group II base oil production, announced in May 2017 that it will be producing Group III base oils. At the time of announcement, this made Calumet the first US-based virgin producer of Group III base oils.
Until the entry of Petro-Canada and Calumet, Group III base oils were imported. Imports were mostly from production in South Korea and handled by SK Lubricants and Phillips 66 for the Americas markets. Neste also sent in Group III oils for US distribution. However, in 2018 Petro-Canada and Calumet will not be the only Americas-based Group III production. At the 13th ICIS Pan American Base Oils conference held in New Jersey in late November and early December, Group II producer Motiva announced it will produce Group III base oils commercially at its Port Arthur base oil facility and will post prices for its Group III oils.
Another change in Americas base oils imminent in 2018 is the retreat of Flint Hills Resources (FHR) from base oils production, handing full production responsibility at the Lake Charles, Louisiana, Excel Paralubes base oils facility to Phillips 66. January 1, 2018 is the official date of the change with FHR and Phillips 66, with teams from both companies working to facilitate changes and ensure service quality to all concerned parties.
Despite Group III base oils surging to the forefront of market discussion, Group II base oils remain the workhorse base stock of the industry, says Taylor. Group II oils are able to fulfill approximately 97% of motor oil requirements, according to comments over the past two years from Group II producers and from buyers.
Driven by regulatory stipulations that require reductions in carbon emissions, Original Equipment Manufacturers (OEMs) have moved to new vehicle engine designs that will continue to push the base oil industry in 2018 and beyond. Increasing use of Group II and III, with polyalphaolefins (PAOs) and other synthetics will gain more use in passenger car motor oils (PCMOs) and in heavy duty vehicle applications.
These drivers will move the Americas – and global – base oils industry toward light viscosity, premium performance, motor oils that can only be achieved by the use of Group II, II+, III, III+ and Group IV (PAO and synthetics) base stocks, says Taylor.
The question is often raised in the Americas base oils market concerning the fate of Group I base oils in a market zooming into light viscosity, low sulphur oils. That question is again highlighted for 2018 when the base oils industry will need to consider changes in marine applications for base oil lubricating systems and greases.
The International Marine Organization (IMO) is setting new international regulations limiting sulphur in fuels for oceangoing vessels. This has implications for refiners and for vessel operators. Marine applications are a main application for Group I oils, so with a 2020 timeline set for invoking the new regulations, the Group I base oils segment will be focused on these challenges in 2018.
Judith Taylor is an 18-year ICIS senior editor with experience covering a wide range of markets. She has responsibility for the US base oils portfolio, including coverage of paraffinic waxes. She covered the oleochemical markets for over 10 years and has an industry background in surfactant chemistry and biodiesel. She is well known in the sector for expertise on chemical pricing dynamics and logistics, and has experience as an industry speaker. She holds a Bachelor of Science degree in biology and a Bachelor of Arts degree in English.