Petronas to focus on Group III+ base oils

Source: ECN

2019/02/22

Petronas Lubricants International (PLI) is refocusing on Group III+ base oils, and the business plans to expand its production despite longer-term concerns about feedstock availability, its chief commercial officer told ICIS.

Standard Group III grades have become “commoditised”, according to PLI’s Giuseppe Pedretti, which has driven the decision to focus on the more specialised grade. The company is also looking to earn more approvals from manufacturers.

Pedretti said the move to Group III+ is a “strategic change in the direction”.

Group III+ production started in 2018 at the Malaysian producer’s base oil plant in Malacca which currently has a capacity of 300,000 tonnes per year.

PIVOT TO 100% GROUP III+

“We adapted the refinery to switch from normal Group III to Group III+. Now we can produce 100% Group III+,” said Pedretti. He would not reveal an exact date for a complete switch-over.

“It will not be immediately 100% Group III+… The capacity will gradually switch from Group III to Group III+. It will be very soon 100% Group III+,” he said.

The entire business will pivot towards the pluses, he suggested, adding: “In the future… formulation for captive use will only use Group III+.”

Capacity is reduced when producing Group III+, but the company is investing to expand capacity, said Pedretti, although the executive would not reveal how much more would be added, and only state that “soon it will be much more than that”.

Explaining the reason for the company’s change in direction, the executive said: “Group III [is] kind of a commodity. [There is significant] capacity installed in the world … Group III+ is different, it’s improved CCS [cold cranking simulator], much better VI [viscosity index].

“This kind of product can formulate your 0W [lubricant grade] formulation with much less PAO [polyalphaolefins],” he added.

Lubricant formulations such as 0W30 have been a growing feature of the passenger car market.

Group III+ prices are typically more expensive than Group III but nowhere near the cost of PAOs, which are expensive Group IV base oils and can be more than double the price of a Group III grade.

PLI officially launched a new base oil brand, ETRO+, this week.

“For new standard regulations coming up, ETRO+ or Group III+ is definitely a very important ­solution that could create a big change in the market. It’s why we really bet on this product,” said Pedretti, pictured.

Acknowledging the competitors such as SK Lubricants and Shell/Qatar Petroleum, he said: “A few produce Group III+… Yubase, GTL. Not many.”

APPROVALS IN THE PIPELINE

Those familiar with the Group III market will be aware that approvals for base oils to be used in lubricant formulations can drive value for some product. They are often used as a selling point by producers with material and as a justification for higher prices versus non-approved.

However, the Group III marketplace in Europe has become increasingly competitive in recent years with the growth in global capacity.

PLI are positioning their Group III+ as offering a “cost advantage” within a lubricant blend compared to PAOs, according to Pedretti.

“That’s why we think… in the next few years it will be better place to be. If you want, there’s less competition in Group III+ than Group III,” he said.

“It is not easy to produce Group III+. It’s a very specific process, very specific raw materials, that we have and not everybody has. We’re in a very good position to be a very premium supplier of Group III+.”

Pedretti said the new standard for lubricants such as the GF-6 coming up from the International Lubricant Standardisation and Approval Committee (ILSAC), are a focus as well as with original equipment manufacturers (OEMs).

“New standards are coming up. We have a plan to get more approvals. It’s a three year plan to get all the approval necessary to compete in this market. Some approval are already available. Some will come.

“GF-6 is not here yet and we’re working to be ready for that… with our additive partners.”

Not only those but other OEM approvals are also “coming up”, he added.

FEEDSTOCKS A CONCERN

Asked if the supply of feedstock is a concern, Pedretti conceded: “It is a concern. It depends on the process. Our process is based on waxy crude. There [are] not many waxy crudes.

“Luckily we have the Tapis [crude oil], which is available and will be available for the next 12 years at least. Plus the exploration is still going on. We do not have at the moment that problem.”

Tapis oil is a Malaysian light, sweet crude oil that is waxy and highly paraffinic. Output from the mature oil fields has declined.

There are efforts to look for other feedstock options. “Even [with] the expansion project, we’re looking for alternative feedstock that could create the same quality of base oil with a different kind of feedstock,” the executive said.

Tapis was discovered in 1969, making it a mature offshore field. The field’s oil reserves have been tapped from the addition of new satellite rigs from 1978 to 2004, but the field is declining.

In 2009, a new production sharing agreement was signed to move the field to the enhanced oil recovery (EOR) phase in order to force more oil out the field, which is a common practice to keep exploiting maturing fields.

Petronas was reportedly looking to switch to other grades at its Kerteh refinery last year because of concerns about a reduced supply of Tapis.

The base oils press launch coincided with the 23rd ICIS World Base Oils & Lubricants Conference in London from 20-22 February 2019.