OUTLOOK ’12: US base oils look to lighter grades and more re-refining

02 January 2012 16:55  [Source: ICIS news]

HOUSTON (ICIS)--The US base oils market will be looking toward lighter grades and more re-refining in 2012.

While US production remains dominated by Group I base oil stocks, increasing demand for lighter viscosity grades are pushing up the need for Group II, II+ and III base oils.

Demand is rising for lighter viscosity stocks because they help control emissions from automobiles and improve the performance of engines. Using the lighter viscosity base oils also lengthens the intervals between oil changes but can cause issues with some blending packages.

The North American market has been slow to adopt longer drain intervals, but the shift is taking place.

This is demonstrated by a July 2011 decision by Jiffy Lube, the largest oil-change company in the US,  to move from its standard 3,000-mile (4,827 km) lube change to adopting the recommendations made by the maker of the automobile.

Heading into 2012, similar changes are expected to enter the quick-change lube sector, with many North American original equipment manufacturers (OEMs) going to a 7,500-mile oil drain interval (ODI).

“Lubricants are an operating cost, and the industry loves to reduce operating costs,” a speaker at the December 2011 ICIS Pan-American conference said about the longer ODIs.

Where blending packages are concerned, premium light grades such as Group III can aid in meeting the challenges of durability and fuel economy requirements for heavy duty diesel oil (HDDO) vehicles.

Legislation to reduce carbon dioxide emissions and raise fleet fuel-economy-standards, with a potential mandate under consideration by the US Environmental Agency (EPA), is being discussed for 2012.  

Group III’s and poly alpha olefins (PAOs) are what will be needed, according to at least one additive blending company.

Bringing in more Group II and Group III viscosity grades is also gradually shifting trade patterns for base oils.

Most Group II and III production is in Asia, causing a shift to move material from that region to the US.

Shell’s 28,800 bbl/day Group III gas-to-liquids (GTL) plant at Ras Laffan in Qatar is operational as of the late third quarter in 2011, with several shipments of the GTL Group III material arriving in the US.

These shipments were for internal use, with no commercial influx from this plant’s production yet detected in the US market.

Chevron’s 25,000 bbl/day Group II plant at Pascagoula, Mississippi, is progressing toward a 2013 completion, which is causing a number of market participants to foresee the US shifting to a primary supply zone for Group II stock.

Alongside virgin base oil production, the re-refining sector is getting a boost because it is increasingly viewed as a recycling area and part of the move to reduce pollution.

Key to this is emissions control, mainly sulphur levels. Demand for re-refined oil is increasing from the burner fuel segment, since it allows the segment to meet lower sulphur requirements.

In 2011, National Geographic pointed out that US drivers produce about 1.3bn gal (4.9bn litres) of dirty used motor oil annually – a number the US Environmental Protection Agency (EPA) says is too high, especially since this agency estimates about 200m gal of the used motor oil is illegally dumped each year.

Re-refining operations in the US include Safety Kleen, the nation's biggest re-refiner, with approximately 5,000 bbl/day capacity output at its site near Chicago. Other re-refiners include Heartland Petroleum at 1,500 bbl/day, Evergreen Oil at 1,150 bbl/day and Universal Lubricants at about 780 bbl/day.

There are several re-refining projects on the horizon, including Heritage-Crystal Clean, which is planning to build a 2,000 bbl/day re-refinery at Indianapolis for a mid-2012 start date target to make Group II product.

Avista Oil, with a stake combined with Universal Environmental Services, plans to increase used oil collection and potentially develop a re-refinery at Peachtree, Georgia.


By: Judith Taylor
+1 713 525 2653



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