quote:
By 2007 Fischer Tropsch base oils (FTBOs) should emerge as the next quantum leap in base oil quality. These oils should have higher VIs than PAOs and outperform PAOs and existing Group IIIs in most respects. Because Fischer Tropsch projects are driven by environmental and crude oil production incentives, the volumes of FTBOs produced may greatly exceed the demand for Group III and PAOs. Kline & Company estimates that FTBO supply will swell to 10MM MT, or about 30% of the entire base oil market by 2015.
When FTBOs begin to appear later in this decade, they should first displace high-priced PAOs and Group III oils. However, as volumes exceed about 4MM MT1, they should also begin to displace high-cost Group I and Group II base oils. Therefore, if FTBO projects proceed as planned, existing Group III producers may need to shift to lower cost Group II to stay cost competitive.
Correspondingly, any new base oil producer will be emphasizing cost-competitive products, probably Group II, to survive in the post-FTBO market. Or, more generally, high-cost producers may be squeezed out regardless of their quality leaving only the most cost-competitive
manufacturers.
In any event, the customer will be the ultimate winner. The appearance of high-quality, low-cost base oils will be a windfall to customers who continue to see lubricants exceed their expectations. And as high quality base oils emerge in all regions of the world, although perhaps for different reasons, we may be witnessing the beginning of the globalization of the lubricants business.