Base Oil is produced from refining crude oil (mineral base oil) or through chemical synthesis (synthetic base oil), which is basically used to produce lubricating oil. The boiling point range of oil between 550 and 1050 F and consisting of hydrocarbons with 18 to 40 carbon atoms.
This oil can be either paraffinic or napthenic in nature depending on the chemical structure of the molecules. Almost every lubricant used in machines today started off as just base oil.
The American Petroleum Institute (API) has categorized base oils into five categories. The first three groups (Group I, II, III) are refined from petroleum crude oil. Group IV base oils are full synthetic (polyalphaolefin) oils and Group V base oils including silicone, phosphate ester, polyalkylene glycol (PAG), polyolester, biolubes, etc.
In general, only 1 percent to 2 percent of a barrel of crude oil is suitable for refining into base oil. The majority of the barrel is used to produce gasoline and other hydrocarbons. It is critical toward the grade of lubricant as base oils normally make up to 70-97 percent of formulation of a lubricant.
A global survey is concluded that Group II and Group III usage rise 41 percent and 38 percent accordingly and Group I usage is expected to fall 28 percent by 2030. Napthenic will be fall 30 percent and on the other hand synthetic will be raised 60 percent by 2030 expected.
ExxonMobil survey found 65 percent of companies are already using Group I base stocks at lower levels than previous years.
Among the reasons given for shift were that Group II and III oils are more likely to help meet regulations, that they are used more frequently across the industry (77 percent) and cost savings (73 percent).Additionally, it found that respondents expect Group III oils will be the most commonly used grade in 10 years.
Nearly three in four respondents believe that the decline of Group I significantly impacts the market. Companies primarily have to make smaller changes as opposed to more drastic measures like closing plants or refineries (15 percent), shutting down parts of their business (15 percent), taking on less work (14 percent) or laying off workers (13 percent), the study stated.
The most cited smaller changes included changing work techniques (37 percent), working with new base oil manufacturers (36 percent), changing equipment (28 percent) or relying heavily on other groups of base oils (27 percent)."While the industry is clearly anticipating a decline in demand for Group I, it recognize that Group I base stocks will continue to be relevant and favored for specific formulations well into 2030.
Bright stock users may have more difficulty obtaining supply as the market shifts from Group I to Group II and Group III base oils. It will take a decade for electric vehicles to fully capture the market, which is a long time. So, we have plenty of time to innovate new products as per the engine demand.
The global base oil market was valued at $35,430 million in 2016, and is expected to reach $38,031 million by 2023, registering a CAGR of 1 percent from 2017 to 2023. From a geographical perspective, Asia Pacific is projected to lead the global base oil market 41.4 percent share of the global base oil market due to the robust development of the industrial and automotive sector.
The Asia-Pacific base oil market is estimated to register a CAGR of 3.5 percent between 2015 and 2020 and the demand is estimated to reach 25,226.5 KT by 2020.
The demand for base oil is expected to witness a steady growth in the Asia-Pacific countries. The market size is expected to increase in Asia-Pacific, due to the economic growth in the nations such as South Korea, China, Bangladesh and India.
The base oil finds application in the automotive, industrial application, and others. The demand for base oil is the highest from the automotive industry, which accounted for over 57 percent of the total market in terms of volume.
The growing motorization or electric vehicle rate in developing countries is driving the demand for lubricants in this segment which will in turn increase the demand for lither grade base oil to produce lower SAE grade lubricants.
The demand from the industrial machinery and equipment application also accounts for a major share of the total lubricants market and is driven by increasing number of investments in the end-user sectors such as power generation, manufacturing, logistics, automotive manufacturing and others in nations such as China, India, Japan, Bangladesh and South Korea.
Bangladesh is going backward, whereas global base oils/lubricants market is shifting to high quality oils to meet the requirement of the modern machinery and considering the environment protection.
In Bangladesh, around 60 percent lubricants market is captured by low quality lubricants, which is produced from, recycle base oil, low quality base oil or sometime straight mineral base oil without mixing any additives which is strictly prohibited to use as an engine oil.
There are few lubrication oil manufacturers in our country, which are blending non-standard engine oil by mixing some virgin base oil with recycle base oil, which damages equipment worth million USD every year.
Low-quality engine oil has become a big concern and in few years ago, a section of unscrupulous businessmen import lubricants from UAE by mis-declarations and selling it's at a lower price.
In recent survey observed (2018) that lubricating oil is imported from almost every countries in the world through mis-declaration or under-invoicing to get price benefit as a result government loosing million dollar revenue every year.
Huge amount of process base oil also is imported every year which is required for rubber industries and this is not fit for making lubricants. Traders are reforming this process base oil into low-quality lubricants and selling it's to market in cheaper price.
In Bangladesh, lubricants market is going to the worst situation day by day, whereas rest of the world focusing on upgrading oil to protect environment. The industry needs government intervention to ensure the quality of engine oils to save national wealth.
The annual domestic demand of lubricating oils is increasing significantly; it's around 100 million liters, whereas base oil demand around 140 million liter including process oil and market value of base oil around $133 million.
Government standard regulations and proper monitoring can only control the increase of low-quality lubricants market growing trend. The scope of government regulations is vast and does reach all sectors of the economy and all aspects of our daily lives.
The writer is a Deputy General Manager of Mobil Jamuna Lubricants Bangladesh Limited
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