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adds to production disadvantages for Group I plants. In fact, Group I plants have higher costs compared to Group II and III plants – and a much lower crude flexibility. With a growing market and a good fit with fuel strategies and crude flexibility, Group II and III plants are generally in a much better position than Group I plants. Some Group I plants are likely to close, whilst other plants will be forced to operate at reduced throughput to contain inventories. North America led the way in Group I production rationalisation and other regions are likely to follow suit.
In particular, Western Europe is now facing a year of significant changes as far as Group I production is concerned. Four Group I plants will cease production (one of which partially) during 2015 and one more is up for sale – with a high likelihood of not finding a buyer and being converted into a terminal. This will lead to the disappearance of up to 1.5 million tpa of Group I actual capacity in Western Europe – over one quarter of the region’s Group I capacity. Other Group I plants are highly likely to follow – especially in Europe.
The reshaping of the paraffinic pool will lead to a mixed supply picture. In fact, the typical product portfolio produced by Group II and III plants is significantly different from the products produced in a Group I plant. Group II plants have a much lower yield of heavy neutral products (SN 500) compared to Group I plants (as an average 20% in Group II plants versus 33% in Group I plants) and generally heavy neutrals cannot be produced in Group III plants. Moreover, neither Group II nor Group III plants produce bright stock. We can already see this reflected in today’s global supply-demand situation that sends mixed signals: on the one hand, the SN 150 supply is long, on the other hand SN 500 supply is tight and bright stock supply is tight to short. The five year supply-demand outlook for bright stock – if the market returns to a more balanced situation through Group I rationalisation – is that of an increasing undersupply. Assuming that half of the Group I refining capacity that would need to disappear to restore a balanced supply-demand would come with a loss of bright stock capacity, with an average bright stock yield of 16%, the bright stock capacity loss would be between 480 and 800 ktpa. A Group I production rationalisation would therefore lead to a bright stock deficit even in a scenario with net bright stock demand decline. Depending on the growth scenario used, the bright stock deficit could be assessed at 600-800 ktpa by 2020.
Figure 1.
A shortage of heavy products will indeed be the first and most evident consequence of the ongoing developments in the paraffinic pool. However, another aspect – not always discussed but equally important in the formulation of industrial lubricants – is the change in the oil’s solvency. As shown in Figure 1 which illustrates the typical viscosity ranges for Group I, Group II, Group III and naphthenic oils, the disappearance of Group I oils will create both a viscosity and a solvency gap. Group II and III have lower solvency than Group I oils and therefore a different additive affinity and seal compatibility. In several industrial lubricant formulations conversion from Group I to Group II or III will require reformulation and re-approvals – a costly and resource intensive process.
A possible solution can be represented by the combination of naphthenic and Group II or Group III oils – a solution that fills the solvency and the viscosity gap (Figure 2).
Such blends can be tailored to have very similar characteristics and performance compared to Group I oils. This solution also provides an increased flexibility as several properties such as low temperature behaviour, viscosity index, volatility, aromatic content and response to anti-oxidants can be steered by changing the ratio between paraffinic and naphthenic oil, as well as the degree of refining of the oils.
Figure 2.
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LUBE MAGAZINE NO.129 OCTOBER 2015
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