Group II base oils, which have purity comparable to Group III, i.e., negligible amounts of sulphur, aromatics and nitrogen, but heavier viscosity, were the ideal base oil to fill the void. Seeing the unfolding opportunity, Group II producers, at the costs of billions, have been developing new supply capacity, much of which is dedicated to the European market. Why? Group II can be used in more than 93% of all formulations including AEO and Industrial oil applications typically formulated at a lubricant blend plant. Given its purity, performance and expanding availability, Group II is becoming the new Group I in the age of climate change.


Whilst Group I/II/III base oils have by far the greatest volume in the market, there are a number of niche base oils- PAO, GTL, Gp III+ and others - that have a role to play in the changing landscape of the lubricants market.


GTL, Group III+ and PAO will continue as niche specialty fluids GTL base oils have limited production capacity and it appears that the majority of such production is used for internal needs. Given the capital expense, competition for feedstocks and expertise required for producing GTL base oils, it is unlikely that there will be significant supply expansion in the next five years. Due to demand for 0W and 5W AEO, more and more mineral oil Group III+ production is coming into the market and the supply is likely to grow over the next five years. However, the volumes are still relatively modest due to the limited availability of waxy crudes. It will continue being used to minimise the need for PAO in high performance AEO applications.


PAOs are well proven in high performance automotive and select industrial formulations. Demand is consistently strong, but supply is generally tight because, producers of C8, C10 and C12 linear alpha olefins (LAO), the feedstock for PAO, sub-optimise the monetisation of the remaining capacity from the ethylene plant if production is increased dramatically.


Manufacturing PAO – Complex, Costly and Inherently Limited Supply Producing PAO starts with an ethylene cracker making the simplest olefin (ethylene) from hydrocarbon feeds. The primary cracker feed is naphtha. Ethylene is selectively polymerized into linear alphaolefins (LAOs). The heart of the LAO production is C4, C6 (~16%), C8 (12-13%), and drops off to about 10% for C10 and 8% for C12. The lighter alphaolefins, C4-C8 cuts, are comonomers for plastics, whilst the C12- C16 cuts typically go into detergents and the very heavy ones -- >C24 go into specialty applications.


The C8, C10 and C12 LAO can be oligomerised into Polyalphaolefins (PAO). Most C8 goes to comonomer for plastics – only a little goes to PAO. PAO is primarily made from C10 LAO. Additionally, PAOs require a final hydrotreating step to fully saturate the double bonds. Given the competition for feedstock and complexity of the PAO production process, PAO supply will continue to be limited and relatively costly. As a result, its use will be confined to operating environments with exceptionally high or low temperatures, or circumstances requiring excessively long lubricant life - like space travel or wind turbines


Recent announcements by Shell, Chevron Phillips and Ineos promise 850,000 t/y of new LAO production capacity. However, only a modest percentage of that is likely to be converted to PAO for lubricant applications, likely resulting in supply remaining tight. In all probability, PAO production will find its way to the most critical applications requiring low volatility and the best low temperature performance.


Over the last few years a number of “alternative” base oils have been introduced. They are typically identified as “bio based” because at least one of their main raw materials comes from a “renewable” source, most commonly sugar cane, and, they generally are biodegradable. They fall into two categories, esters and saturated hydrocarbons. The saturated hydrocarbons may provide excellent performance and have the potential to be an alternative to Group III+ and Group IV base oils. However, in the near term, due to the complexity and qualification cost of the AEO approval process, they are likely to remain “niche” products in applications that require biodegradability performance such as European Ecolabel.


Due to their limited supply and/or high manufacturing costs GTL, Group III+ and PAO products will continue to be used in niche applications.


As supply grows, Europe is moving to a Group II/III lubricant blending scheme Automotive OEMs have been under tremendous pressure to reduce exhaust emissions and improve fuel economy. Their engines designed to meet the tightening performance standards require high performance lubricants with no impurities. As specifications tightened to the point that formulating with Group I was impractical, the region’s OEMs, with support from the additive companies, initiated aggressive formulating research and engine testing programs. Their efforts focused on optimising performance with Group II/III base oil blends, which are available in sufficient capacity to satisfy the demand required for new specifications.


According to Kline & Company, within the next three years, global production capacity of Group II/III will exceed that of Group I by 7.5 million tonnes – 23.0 for Group I vs 30.5 for Group II/III. With growing supply availability and reliability, the role of premium base oil in the market’s technical development will continue to grow.


The impact of reliable supply of Group II in the region has been significant because it can optimise formulating costs and wear protection properties for mainline HDMO high viscosity applications, 15W-40, 10W-40 and 10W-30, which account for 96% of the market.


Continued on page 8 LUBE MAGAZINE NO.131 FEBRUARY 2016 7


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