Group I Base Oils stay ahead in China for the moment, but domestic majors push Group II growth.
At the recent ICIS Base Oils and Lubes Conference in Seoul, PetroChina's Kong Jinyuan reported that Group 1 capacity (63%) and consumption (56%) continues to dominate the domestic market. Group II and III base oils for 2010 made up a meagre 17% of China's capacity against 25% consumption, making these oils the largest volume of imported product.
China oil capacity & consumption Source:PetroChina, Kong Jinyuan |
Although Singapore, Korea, Japan, Russia and Taiwan are the largest sources of imported oil according to Kong Jinyuan, Oman also revealed that China remains the Sultanate's highest volume purchaser for the seventh consecutive year, taking more than 111m barrels of Omani crude, more than 40m barrels more than 2009.
Meanwhile C1 Energy's Nancy Shi, also presenting at the ICIS conference, predicted that after record-high oil prices in Q1 of 2011, they are set to drop back to "reasonable levels" by August, allowing the base oil market to "warm up again" for the end of the year as Chinese consumption peaks.
Looking further ahead, Shi forecast that while base oil apparent consumption is set to rise over the next five years by a little more than five percent, year on year percentage growth will remain more or less flat at just below 10%.
The major production plant upgrades recently announced by China's three oil majors, who have a collective 82% market share of the domestic market, shows a definite move towards higher volumes of Group II base oil production in a bid to reduce China's import needs of higher quality feedstock to meet the increasing demand for high-performance lubes.