Group I base oils lose share to Group II as production capabilities improve.
Sinopec ramp up Group II production Image: Sinopec |
China's oil majors are gradually turning to Group II production, after several new plant openings and expansions across the country.
By the end of 2015, the nation's base oil production capacity had risen to 700m tons, of which 49% was Group II, compared to 38% Group I base oil.
Furthermore, as new regulations have relaxed restrictions around the export of lubricants, greases and base oil products, China will likely see a steady rise in Group II base oil production as it serves the nearby Southeast Asian region.
PetroChina, which was briefly the world's first $1 trillion company in 2007, has said it will upgrade all five of its factories over the next few years. Many smaller, independent producers are likely to follow suit, despite depressed global oil prices delaying many similar projects.
Lower oil prices have prompted China to relax exporting restrictions for base oil products. Previously, only PetroChina, CNOOC and Sinopec could gain export licences, which are now more readily available to independent producers as well.