The Future of Base Oil Supply in Europe: PAOs, Groups II & III and GTL
The future is now
Over the last five years much has been written about increasing complexity in lubricant formulations in the face of tightening specifications. Needless to say, that has led to countless articles on what the supply availability crystal ball is predicting for Europe. We can take comfort that the free market mechanism of supply and demand seems to be working exceedingly well, albeit perhaps uncomfortably for blenders as they have had to look at new formulations that include unfamiliar base stocks. Going forward base oil procurement strategies will be more important than ever.
For decades, Group I base stocks have been the workhorse for lubricant formulators around the world. In Europe, due to its commitment to environmental protection, that supply/demand balance is changing. Environmental protection legislation has led to tightening specifications for fuel economy and exhaust emissions from all vehicles. In order to meet those requirements, original equipment manufacturers (OEMs) designed engines that have a much lower tolerance for impurities in the lubricant. To address this, the European Automobile Manufacturers’ Association (ACEA) tightened lubricant specifications. New requirements call for formulations that have Low/Mid amounts of Sulphated Ash, Phosphorus and Sulphur (SAPS). On top of that, OEMs are establishing their own lists of specifications for lubricants that will optimise the performance of their engines.
Most of these new specifications severely limit the use of Group I due to its high sulphur content and viscometric and oxidation performance. As a result, demand for premium base oils is growing, whilst the demand for Group I has dropped significantly. Data reported by Argus, Kline and others suggests that Group I capacity in Europe has been reduced by 30% and is projected to decline by another 21% in 2016.
During this transition, premium base oil producers were not resting on their laurels. Group III was already well known in the market. There was significant volume coming from Asia. With demand for 0W/5W PCMO formulations steadily rising, in-region production began to grow. SK – Repsol, Rafinerija ulija Modrica, and Tatneft have announced 935 kMT of Group III production capacity in the market, according to Argus.
New specifications for Low/Mid SAPS heavy-duty motor oil (HDMO) formulations created a gap in the supply chain. Heavy-duty engines need viscosity for adequate engine protection. Historically, that came from Group I, but the new sulphur limits make its use impractical. Formulations based on Group III alone have insufficient viscosity to provide adequate engine protection and Group I has too much sulphur to be used.
Source: Argus and Kline
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LUBE MAGAZINE NO.131 FEBRUARY 2016
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