Base Oils – ICIS Conference Notes
While no longer invested in base oils related markets, I like to keep my hand in, should anything come up in that sector. To that end, I spent a day and a half at the 6th Annual Pan American Base Oils Conference organized by ICIS in Jersey City, just over the Hudson River from lower Manhattan. Kudos to Michelle Fagan and the rest of the ICIS team for a superbly organized event with outstanding speakers and a record attendance. This bodes well for the First ICIS World Surfactant Conference next May, organized by the same team and chaired by me.
Some key points from the conference which overall highlighted major changes coming down the pike for this industry and those related to it. As usual this is not a conference report or review. We don’t do that here. We believe that “you gotta be there” at these events. So here are some interesting (to me at least) snippets.
- While Western Europe is essentially a Group 1 market, the Americas a Group 2 market and Asia, Group 3 – get ready for a tidal wave of Group 3 capacity coming on-stream in Asia which is going to force some capacity closures (mainly of Group 1 and 2 refineries) in the Western markets.
- Scale matters: small base oil refineries are being closed and large ones built. With the commissioning of the Chevron Pascagoula group 2 plant (PBOP!), the US capacity will b e 75% Group 2 (from 65% now). With Group 2 oils being usable in 97% of all applications, some of the smaller remaining Group 1 refineries are sure to come under increasing pressure.
- Kline & Co., as usual, delivered an outstanding presentation on the subject of Shell’s new GTL project (Pearl). Bill Downey emphasized how the GTL strategy needs to be analyzed in the context of Shell’s finished lube business which he expects will undergo a serious upgrading when the GTL output is available. Good to know that one of Bill’s colleagues at Kline, Gillian Morris will be presenting at our ICIS surfactant conference.
- Neste gave an interesting talk on their high performance group 3 oils, NexBase, although glossed over their renewables initiatives. Interesting to see that the impact of biofuels on the lube oil market will be addressed at the next ICIS base oils conference in London.
Bottom line – in what, on the face of it, seems to be a boring industry (oil for your car), some big capacity and technology shifts are coming and some plants will close as other (mainly larger and located further East) will open.