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INSIGHT


Despite decline, Group I is here to stay


Dr. Tim Nadasdi, Product Development Advisor, Basestocks & Specialties, ExxonMobil Fuels & Lubricants Company


Over the next few years, the lubricant industry is anticipating a number of changes requiring lubricant manufacturers, and in turn base oil suppliers, to make adjustments as emissions regulations tighten around the world. As a result, there is an increasing need for higher quality formulations that continue to deliver performance benefits while effectively addressing environmental standards.


Base oils, which make up between 75-99 percent of finished lubricant formulations, are engineered fluids that have a significant impact on lubricants’ physical properties and performance. To meet increasingly stringent specifications, formulators have turned to lower viscosity Group II and III base oils for a wider range of applications. Given this shift, the industry is already seeing changes such as Group I production rationalisations, Group II and III capacity increases, and supply and demand imbalances1


.


These factors have some in the industry questioning the viability of Group I base oils for the longer term. Still, Group I base oils provide essential benefits for specific key industries and will continue to remain valuable well into the future.


The Changing Base Oil Landscape


The base oil industry has been in transition for several years. Most notably, the automotive industry’s demand for better fuel efficiency, longer drain intervals, as well as reduced emissions has led to evolving engine oil requirements that call for the use of Group II and Group III base oils given their lower viscosities, better oxidative stability and lower volatility.


Additionally, the implementation of International Maritime Organisation 2020 emissions standard, one of the biggest events to impact the refined product market


1 ExxonMobil’s Basestocks 2018 Industry Pulse Report 2 Based on ExxonMobil assessment of publicly available information


since the introduction of the hydrocracker, has given a large advantage for Group II and Group III producers. As a result of the low sulphur by-products of production, Group II and Group III base oils will find higher value in the IMO 2020 pricing environment versus the high sulphur content byproducts of Group I production2


.


Figure 1: Global GPI paraffinic base stock supply demand (Source: ExxonMobil assessment of publicly available information)


This shift in conversion from Group I to Group II and Group III base oils in light of evolving automotive standards and the implementation of IMO 2020 have some questioning the viability of Group I base oils and whether or not its demand is declining over the long term – so much so that several Group I plants have already closed in response.


Over the last decade, the closure of less efficient Group I base oil plants has resulted in the overall decline in supply of Group I base oils leading to a sense of uncertainty about its future. ExxonMobil’s Basestocks 2018 Industry Pulse Report confirmed these feelings of trepidation, as almost three-quarters (72 percent) of the respondents believe that Group I’s decline has had a significant impact on the industry and many admit it has been difficult to adapt (50 percent).


14


LUBE MAGAZINE NO.157 JUNE 2020


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