Base Oil Market

Global Industry Analysis (2017 – 2020) – Growth Trends and Market Forecast (2021 – 2025)


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Base Oils and Additives: A Recipe for Lubricants

Base oils are complex mixtures of molecules, derived from crude oil by refinery processes. All oils from each base oil type are not the same as the formulations can produce unique distinctions (depending on their method/process of production, the range of their viscosity index, and the percentage of saturated hydrocarbons). There are five base oil designations - I to V, and the oils are further classified on the basis of their composition, as paraffinic, naphthenic, and aromatic. Serving as the key raw material in lubrication manufacturing, base oils act as the foundation of lubricants before they are blended with additives or thickeners in case of greases. Steady expansion of the lubricants manufacturing industry is expected to sustain the growth of the global base oil market in the foreseeable future.

While additives enhance the existing base oil properties and suppress any undesirable properties, they make base oils suitable for specific end uses. Lubricant classes on the basis of the constituent base oil include mineral, synthetic, and vegetable. Not all lubes are created equal; the lubricant selection largely depends on its application. Mineral oils are intended to produce a superior lubricant, optimising the resultant properties. What may not be achievable with a mineral oil is created with synthetically generated oils. Irrespective of the oil type, each base oil is designed to have a specific application. Base oil properties comprise the aniline point (a measure of the base oil’s solvency toward other materials including additives), and hydrolytic stability (the lubricant’s resistance to chemical decomposition in the presence of water), oxidation, pour point, thermal stability, viscosity limitations, viscosity index, and volatility. While the base oil market outlook looks promising, their production prospects hinge on hydrogenation, hydrocracking and hydroprocessing, feedstock’s (new is natural gas) and process improvements.

High-performance Base Oils - Sustainability for Today and Tomorrow

The quality requirements for lubricants have become stricter over the past decades, which is attributable to vehicle engine design innovations in line with the vehicle emission standards, industrial demand moving towards high viscosity index (HVI) hydraulic fluids, and high oxidation stability turbine oils. Energy conservation, greenhouse gas (GHG) emission regulations, and the modernisation of vehicle fleets and heavy equipment all call for higher performance of oils. This, in turn, has put pressure on companies to further develop their base oil products and their production processes to meet the tightening requirements. New and improved base oils are helping engine and equipment manufacturers economically meet increasing demands for better, cleaner lubricants.

Lubrication is More than Oil or Grease – It’s an Opportunity

Lubricants are the magical substances that can either add to the bottom line or can even subtract from it. They make a well-oiled machine a profitable one and regular, adequate lubrication contributes towards the reliability and performance of respective production lines, plays a key role in protecting and preserving assets to keeps the running well to generate products and profits. The annual wear and tear billing and resulting production loss is nearly $240 Bn in the US alone, which points to a strong scope for the penetration of base oil market players.

Shifts in Base Oils

Transition from the American Petroleum Institute (API) Group I to Group II continues. The demand for higher quality (oxidation, and dispersancy), specifications with sulphur restrictions, and demand for lower volatility is seen in lower viscosity grades. API Group I base oils with higher viscosity still find applicability in marine, railroad, and gear oils; those with lower viscosity are suitable for transformers, processes, and sprays. Growth will be the trend for the Group II and Group III oils, which are certainly preferred in most automotive formulations. As demand for fuel-economy lubricants increases, the higher VI oils will have the advantage of being suitable for making low-viscosity lubricants while maintaining the needed volatility properties.

The demand for API Group III (and Group III Plus: gas-to-liquids) will increase, pushing the growth of the Society of Automotive Engineers (SAE) rated 0W-xx and 5W-xx grades. A new type of ultra-performance base oil derived from wax which is derived from natural gas via the Fischer-Tropsch process (super-synthetic Group III base oils) is in pipeline. Lubrication performance that previously was achieved only in small-volume niche applications, using polyalphaolefin (PAO) and other specialty stocks, is now widely available using the new generation of Group II and Group III oils. Due to relatively high feedstock prices, PAO-based lubricants will relegate to smaller, specialised markets in the future. Niche green base oils constitute those re-refined/derived from used oil recycling), and bio-lubricants derived from sugarcane, and algae.

Asia Pacific Key Market for Base Oils

70% of the global base oil demand is in Asia Pacific, especially China, India, and Indonesia. While growth in China is tapering, the real growth engines are India, and Indonesia. Moreover, in the global base oil market, there is a shift in demand from Group I to Group II oils (engine design alterations driven by stringent lubricant regulations, government mandates on energy efficiency and emissions - Bharat Stage VI in India, and China 6). Moreover, the International Maritime Organisation’s 0.5% sulphur is forcing global supply changes and placing pressure on refiners to produce low sulphur fuel oil, denting Group I oil prospects.

Today, electric and hybrid vehicles are growing. Electric vehicles could make up nearly half the fleet of passenger cars and trucks by 2040. Electric vehicle mandates in China,a and many European Union nations have set a target of phasing out gasoline vehicles by 2040 or sooner. The oil industry has only a few years to stem the tide. Nevertheless, the development has created an opportunity for new lubricant types such as bio-lubricants, nanotube-based, and mineral oil-based lubricants with better fluidic performance, and superior electrical and thermal properties.

Competitive Landscape: Global Base Oil Market

Some of the key players in the global base oil market include Saudi Arabian Oil Co., ROSNEFT, Kuwait Petroleum Corporation (KPC), Royal Ducth Shell, National Iranian Oil Company (NIOC), China National Petroleum Corporation, China Petrochemical Corporation, Exxon Mobil Corporation, Petróleo Brasileiro S.A., HPCL, Repsol, bp p.l.c., Abu Dhabi National Oil Company, Nynas AB, Chevron Corporation, and Petróleos Mexicanos. In May 2021, the China Petrochemical Corporation (Sinopec) announced plans to start operating a 250 kt/yr Group II base oils unit in Beijing in July, 2021, encouraged by the recently witnessed strong demand and firmer margins.

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