ASIA CHEMICAL PROFILE

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Base oils
JASMINE KHOO PROFILE LAST PUBLISHED 5 SEPTEMBER 2014

USES
Base oils are the main component of finished
lubricants and are derived from the heavy
crude oil fraction in vacuum distillation.
They are refined to impart physical and
chemical properties that will make a good lubricant. Most base oils are combined with
small amounts of chemical additives to form
the finished lubricants such as motor oil.
The traditional method of making base oils
involves solvent extraction to remove aromatic compounds and solvent dewaxing to take
out unwanted waxes. More recently hydroprocessing techniques employing hydrogen
and catalysts have been used to make base oils.
Group I base oils, which are mostly produced by solvent processing, are used in less
demanding applications. Group II and III base
oils are produced by hydroprocessing and
used in higher-performing lubricants. Group
IV base oils are synthetic oils, typically based
on polyalphaolefins (PAOs). Group V oils are
used in the formulation of oil additives.
SUPPLY/DEMAND
Base oils supply in the Asia Pacific region
varied greatly among the various groups and
grades during 2015.
Group I supply was mostly short throughout the year, with spot trade for SN150 scarce.
SN500 and brightstock supply and demand
conditions were largely balanced.
Despite unfavourable demand brought
about by pessimistic economic performance
among Asian countries, scheduled mainteASIA BASE OILS
$/tonne, spot FOB Asia
1,400

Group I SN150
Asia Group I brightstock
Asia Group I SN500

1,200

nance at some key Asia-based refineries

capped supply and prevented price slides.
However, on the demand front, the Chinese import market was also less active in importing heavy grade base oils, including
brightstock, on the back of the approaching
winter season, a traditionally dull period for
heavy grade usage in northeast Asia.
The same was true for the Group II sector.
Demand for high-viscosity cargoes weakened
with the arrival of the colder seasons and buyers were seen to purchase low-viscosity
grades such as 70N and 150N more actively.
Group IIs supply conditions also evolved
from the second half of 2014, as new start-ups
led to an increase in supply of light-grade cargoes such as 150N. Supply of 500N, on the
other hand, was mostly tight during the year.

PRICES
Group I spot prices in Asia, which were stableto-firm in H1 2015, began to feel the impact of
falling crude oil prices and poor downstream
market conditions from July. While SN150 remained largely balanced on the absence of
spot trade despite falling upstream prices,
SN500 prices came off in tandem with crude.
Asian brightstock prices, which steadily
rose in early 2015, buoyed by snug spot availability, was hit the most. Prices on a FOB Asia
basis tumbled by around 14.4% as refiners
grappled with both the traditional demand
lull and plummeting crude values.
For Group II base oils, one of the most
pressing concerns in 2015 has been the widening price gap between Group I and Group II
heavy-grade base oils. The rising popularity
of Group II 500N over its Group I counterpart
prompted a shift in demand across Asia. Supply of the grade has also tightened since Q2
2015 following a spate of turnarounds at
Asian facilities. This lent support to higher
prices, despite declines in all other grades.

1,000
800
600
400

Sep
2014

Sep
2015

TECHNOLOGY
Base oil is typically defined as oil with a boiling point in the range 550-1,050F (288566C), consisting of hydrocarbons with 18 to
40 carbon atoms. This oil can be either paraffinic or naphthenic in nature, depending on
the chemical structure of the molecules.
Group I base oils are classified as less than
90% saturates, greater than 0.03% sulphur and

30 | ICIS Chemical Business | 5-11 October 2015

with a viscosity-index range of 80-120. The

temperature range for these oils is 32-150F.
Group I base oils are solvent-refined, which is
a simpler refining process. This is why they are
the cheapest base oils on the market.
Brightstock is defined as a base oil at the
upper end of the specifications for Grade I
base oils. They are mainly used in lubricant
and lubricant additive production. It is a
Group I base oil that has undergone solvent
refining and dewaxing processes. To finish
the refining it is treated with hydrogen to
clear out any impurities.
Group II base oils are defined as being
more than 90% saturates, less than 0.03%
sulphur and with a viscosity index of 80-120.
They are often manufactured by hydrocracking, which is a more complex process.
Group III base oils are greater than 90%
saturates, less than 0.03% sulphur and have a
viscosity index above 120.

OUTLOOK
The near-term outlook for the rest of 2015 is
clouded amid uncertainty over further volatility
on crude values. This, coupled with seasonally
weak demand for heavier grades, is likely to
limit upward price movements in heavier
grades across Asia, according to market players.
An increase in Group I supply following
the completion of maintenance at some major
Asian facilities is set to boost availability and
weigh on prices in the last quarter of the year.
While discussions for 150N gain momentum towards the end of the year in view of
seasonally strong offtake, a persistent supply
overhang is expected to cap a significant price
increase in the near term. This, in turn, is likely to limit SN150 trade as the two grades can
be used interchangeably in several downstream applications.
The price gap between light and heavy assessed Group II grades could potentially narrow in the near term, market players say, on
the back of shifting demand patterns in key
northeast Asian markets.
Uncertainty is likely to continue clouding
the near-term market in the Middle East, with
factors such as crude oil prices and the difficult
political landscape causing unpredictability.
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