US Pale 60 base oils gain South American interest

Focus article by Judith Taylor

HOUSTON (ICIS)–Interest in Pale 60 oils in the US is gaining momentum in the South American market, as parties in both regions see opportunities for this naphthenic oil grade.

Naphthenic base oils are often referred to as “pale” because of the light colour most tend to have.

Pale 60 base oil is a naphthenic oil that is a primary component of transformer oil – so much so in fact that many market participants use the terms interchangeably, often calling Pale 60 “transformer oil” routinely.

Pale 60 base oil also can be used in shock absorber fluids for automotive and heavy duty vehicles because of its low pour point and seal swelling characteristics.

But it is the transformer oil application that is driving the interest in South America – and US interest in sending Pale 60 into the export market.

According to internet sources, transformer oil is typified as an insulating oil – a mineral oil stable at high temperatures with excellent electrical insulating properties.

As such it is used in oil-filled transformers – the units often seen atop common electrical poles – so common they are often overlooked in the US.

These transformers need periodic replacement and in regions of either weather damage or emerging, growing population centres, the need for the oils to fill the units can be strong.

This is increasingly the situation in South America where the transformer oil market is estimated to be about 120,000 tonnes/year, with Brazil the main market at approximately half of this demand factor.

There are just four main naphthenic base oil producers in the US – Calumet, Ergon, Cross Oil and San Joaquin Refining (SJR). Chevron came in with the 60 grade paraffinic to participate in this sector.

Europe has negligible naphthenic base oil production and the situation is similar in Asia, making the US the primary player in this base oil segment.

The key issue is the ripe demand offered by South America – particularly Brazil – as its cities grow and the country stretches out to examine best ways to connect population centres with its vast outlying towns and villages.  

“We have been getting more requests and questions about transformer oils,” one US base oil producer commented.

Other US producers have commented about more activity seen in the export market, pointing to new production of Pale 60 oil – a paraffinic version – from Chevron’s new base oil facility at Pascagoula, Mississippi.

Chevron early on announced it would be making four grades of base stock at the new facility on the Gulf Coast – the 60 grade, a 100 grade, a 200 grade and a heavy 600 grade.

Production volumes of any of the grades is proprietary to Chevron or any other US producer on any grade.

However, as Chevron was bringing the 25,000 bbl/day base oil facility into the start-up phase, it clearly said that its plans for the fresh output included active exporting, with South America and Europe main destinations.

South America, with only an approximate 31,000 bbls/day of paraffinic base oil production and less than 5,000 bbl/day of naphthenic production, presents a significantly important near-market for US base oil production of all grades.

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