Calling for Better Chinese Base Oils

BEIJING – During a lubricants conference here last month, Chinese industry insiders said the nation should further develop its ability to produce high quality base oils – specifically high viscosity index API Group II and Group III oils – instead of buying from abroad.

Group I and average quality Group II base oils are oversupplied in China, Qu Yuqing, sales manager at the base oil unit of state-owned energy giant Sinopec, said at Enmores China Lubricants Market Focus. Qu estimated Chinese private refiners have combined capacity to produce around 10 million metric tons per year of base oils.

Among them are Qingyuan, which produces 400,000 metric tons per year of Group II in Shandong province; Hainan Handi Sunshine Petrochemical Co., with a 300,000 t/y Group II plant in Hainan province; and Hengli Petrochemical, which has a 600,000 t/y Group II/III plant in Liaoning province.

Despite the production capabilities of domestic facilities, imported base oils are gaining market share in China. According to China Customs, imported base oils accounted for 40 percent of Chinas total base oil consumption in 2016, up from 22 percent in 2007. In 2017, China imported 2.8 million tons of base oils, down slightly from 2016, Most of that volume was highly refined Group II but orders for Group III base oils were on the rise.

China doesnt need that much average quality Group II base oils, Qu said. Private refiners, especially small refiners, are facing overcapacity issues.

He suggested these companies look into countries covered by Chinas Belt and Road initiative, which partly aims to export Chinas excess oils to emerging markets such as Central Asian countries.

Sinopec itself is selling some of its own base oils – mainly Group II base oils from its Gaoqiao operation in Shanghai and Group III base oils from the Maoming operation in Guangdong province – overseas through its wholly owned subsidiary in Singapore, Qu said.

Sinopec has significant resources and is bending some of them toward the goal of becoming a key Group III supplier. In December the Maoming facility became the first in the nation to make Group III+, and now the company says it plans to increase Maomings capacity from its current level of 600,000 t/y (including Group I, II and III) to 1 million t/y by 2020.

It may take some time for the market to acknowledge our quality, Qu acknowledged. Sinopec aims to be Chinas largest base oil trade company.

The scene is similar in the synthetics sector. China does not lack high-viscosity polyalphaolefins, but relies heavily on imported low-viscosity PAOs, said Li Jiusheng, director at Shanghai Advanced Research Institute, a division of the Chinese Academy of Sciences.

Few Chinese companies can develop the type of olefins needed for low-viscosity PAOs, Li said. Imported olefins are expensive – at least 20,000 (U.S. $3,139) per ton – hiking costs for synthetics companies, he added.

SARI is a technical consultant for Luan Group, a Shanxi province-based coal miner that owns a coal-to-liquids facility that produces PAOs. SARI helped the company build a lab to test methods of synthesizing low-viscosity PAOs using olefins produced with metallocene catalysts.

China shouldnt rely on foreign companies for low-viscosity PAOs because they are used in some core industries such as aviation, military and rail systems, Li said.

Haindi Sunshine Petrochemical refinery

Photo courtesy of Handi Sunshine Petrochemical Co.