16 June 2011 03:27 [Source: ICIS news]
SEOUL (ICIS)--Global supply of base oils is expected to expand by at least 8.5m tonnes/year by 2015, but demand for base oils and lubricants is expected to see flat or slow growth, a consultant said late on Wednesday.
Most of the new supply will be for higher quality Group II and III grades, driven partly by higher refining margins for such premium base oils, said Stephen Ames, managing director of SBA Consulting at the 5th ICIS Asian Base Oils & Lubricants Conference in Seoul.
The push towards clean fuels will also drive ultra-low sulphur diesel demand and production, potentially providing more feedstock for Group II and III base oils output, he said.
Around 8.5m tonnes/year of base oils capacity is expected to come on stream between 2011 and 2015, based on the projects that have been announced so far, he said. Over 85% of the new supply is for Group II, III and gas-to-liquids base oils, while naphthenic grades will make up about 13% of the added production.
At least one-third of the new output is scheduled to enter the market within the next one year.
By the end of 2016, debottlenecking projects at existing plants may also boost global production by another 2.1m tonnes, mostly for Group II and III base oils, Ames said.
A further 2.2m tonnes of Group I capacity may be upgraded to Group II and III quality over the next five years, said Ames. Close to half of the projected increase in supply has already been scheduled or is under construction. Most of the upgrading will be limited to the lower-viscosity base oils for automobile engine oil applications.
However, the growth will be offset partly by the closure of older and less efficient plants, said Ames. Around 8m tonnes/year of such capacity could be lost, with Group I refineries the most vulnerable.
“Europe will be most affected as it houses a number of old Group I plants,” he said.
The long-term viability of refinery complexes in the Atlantic basin has also come into question because of factors such as weak fuel demand growth, poor refining margins and an expected increase in refining costs on the back of stricter carbon dioxide legislation for vehicles, he said. This, he added, does not bode well for the prospects of Group I base oil plants in the region.
Global demand for base oils and lubricants is expected to rebound from the steep declines in the second half of 2008 and 2009, said Ames. However, its growth is likely to be flat or slow because of the bleak demand outlook for developed economies.
Base oil demand worldwide is likely to total around 37.2m tonnes in 2016, up from an estimated 35.8m-36.1m tonnes in 2010, but broadly unchanged from the 37m tonnes recorded in 2007.
Global lubricant consumption is projected to reach around 38.8m tonnes in 2016, close to the pre-recession levels of 38.4m tonnes in 2007.
Lubricant demand in Europe and the US will likely fall over the next five years, constrained by factors such as longer oil drain intervals, austerity measures implemented by governments to ease their budget deficits, the migration of industries to developing countries, and higher fuel economy and emission standards.
However, lubricant demand in the Asia-Pacific region is expected to grow to 16.3m tonnes in 2016, from around 14m tonnes in 2010, Ames said. Consumption is underpinned mainly by strong economic growth in countries such as China and India.
The 5th ICIS Asian Base Oils & Lubricants Conference ran from 14-15 June 2011.
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