CitationDownload as .RIS
Emerald Group Publishing Limited
Copyright © 1998, MCB UP Limited
The Second Annual World Base Oils Conference 1997
The Second Annual World Base Oils Conference 1997
This conference, organised by ICIS-LOR, took place at the Four Seasons Hotel, London, on 15-16 December 1997. ICIS-LOR is a market intelligence company operating in the field of chemicals. Over 80 chemical products are covered by their service, which provides information on prices, plant locations, name-plate capacities, operating rates and shut-down schedules.
This seminar was attended by some 145 delegates from over 30 countries, i.e. a similar number attending the first such conference organised by the same company the previous year. The conference was well organised, with a reception cocktail party for delegates on the evening of 13 December to enable delegates to meet up informally and discuss the issues of common interest. The conference was chaired by John Barnes, deputy managing director of Millers Oils Ltd, and the immediate past president of the British Lubricants Federation. In his opening remarks, he highlighted the tough year experienced by base oil refiners owing to the competition from several new refineries which had already, or were about to come on stream. Demand had generally been poor and had fallen below expectation, with base oil falling to almost commodity status at one point during the year. Questions concerning the future supply/demand situation and the impact of non-conventional basestocks would hopefully be answered by the various speakers.
Keynote address: World oil supply and demand
Philip Algar (freelance journalist and broadcaster specialising in oil)
The speaker presented a series of informative slides highlighting factors influencing exploration, the world proven crude oil reserves and production, a history of crude oil prices, factors influencing oil demand, the world oil demand, examples of production cost reduction possibilities, and finally upstream and downstream trends and issues. He forecast even lower crude prices for the coming year. He highlighted recent changes in the Russian commercial approach which involved a further opening-up of trade possibilities, and forecast a slow resurgence for their economy, with production and demand on the increase. There was a current shortage of deepwater drilling rigs and skilled manpower, with further major investment unlikely due to the perception of poor returns in the short term.
He drew attention to new technologies including the Canadian tar sands, and the increase in recoveries from existing wells, which had more than doubled, rising from 30 per cent to 70 per cent. However, one must not assume that downstream developments will stagnate. Vehicle economies were steadily improving, and less energy was involved in their manufacture, since environmental pressures were increasing incentives for energy saving. Substantial growth was envisaged in Eastern Europe, Latin America, and Asia, the current problems of the latter having been exaggerated by the media. Crude prices were forecast to fall in 1998, with uncertainties surrounding Iran and the Caspian Sea. Also, Iraq was likely to disturb the situation even more.
There followed a lively question and answer session, where the following additional information emerged. Russia was still a leading producer, with potentially enormous resources: 3m bbls/day forecast by 2010 from the Caspian Sea. The potential of gas as a fuel should also be recognised. Asia had enormous resources. In many undeveloped areas, 85 per cent of gas was flared off or consumed locally, since distribution infrastructures were not in place. There will not be much change in the short term, but there will undoubtedly be change in the longer term. There was also a potential problem developing in Asia, where half of the current population was under 15.
Economics of true recycling of spent lube oil
Jacob Voogd (chairman, Evergreen Holdings Inc.)
The yield, operating costs and investments for converting spent lube oil by the CEP-Mohawk process as practised by Evergreen Oil, Inc. in California were presented. The two basic stages of a re-refinery consist of the production of a metals-free lube distillate followed by catalytic hydrogenation under pressure to remove odour elements, saturate double bonds and cyclics, gasify sulphur, nitrogen and chlorine compounds.
The current low price of base oil has discouraged investment in re-refineries. However, the product resulting from the first stage of the re-refining process is very desirable as a secondary feed to a catalytic cracker in a conventional refinery. This will enable the first stage of re-refineries to be built economically with a lower investment cost and a good return because secondary feeds normally track crude prices whereas lube base oil prices have substantially diminished.
This situation is expected to continue for at least another year during which time older solvent refining plants will continue to be de-commissioned as supply balances demand. The hydrogenation stage can be added to the first stage to complete the re-refining operation once lube base oil prices have recovered. However, economics of re-refining are dependent on the cost of used oil feedstock, which in turn depends on local legislation and the costs of collection/delivery. When considering the latter, collection of used oil feedstock is only generally economical within a 200-mile radius, which dictates and often limits the scale of the re-refining operation. This again clashes with the economies of scale and the lower investment, operational and organisational costs associated with larger plants. However, the advantages of larger plants are gradually being eroded with the development of new technology; also smaller units are easier to control to ensure trouble-free operation.
A number of cost cases were presented, which demonstrated the commercial reality of both first stage and complete re-refining for three different costs of feedstock. There was only one situation, where the feedstock costs were highest, and the sales price of the first stage only of the re-refining process was at its lowest, where the process was not profitable.
Asia Pacific base stocks
Harland C. Bulow (manager, Mobil Sales & Supply Corporation (Asia Pacific))
The speaker outlined the current global supply and demand situation for base oils and lubricants with predictions extending to 2001, with a particular focus on the Asia Pacific situation. He described the various sensitivities and impacts affecting the trading situation. The production capacities in US/Canada had increased significantly from1994 to 1998 although lubricant demand was fairly static. Production capacities in the Asia Pacific region had increased during the period but were matched by the significant growth in basestock demand during the same period. This growth was likely to be sustained but at an even higher level than had been previously predicted. The areas of maximum growth involved China and the Indian sub-continent, and, to a lesser but still significant extent, South Korea, South East Asia (Singapore, Malaysia, the Philippines, Indonesia) and North Asia (Thailand, Vietnam). The most significant impact on trade in this area arose from currency fluctuations leading to demand volatility and/or capacity delays. Bullish crude markets resulted in higher feedstock costs although the lubricant basestock prices were not directly related. Rationalisations were fairly minor in the USA, uncertain in North West Europe and unlikely at the moment in Asia Pacific where there was more dependence on the supply/demand situation. There were signs of a demand shift emerging from solvent refined oils to the hydrocracked variety.
Although movements in crude and basestock prices were comparatively small from October 1996 to October 1997, the large changes in exchange rates between the US dollar and the Asia Pacific countries (in particular Indonesia, Malaysia, Thailand and the Philippines) had resulted in higher net basestock costs. These areas shared the common characteristics of high historical GDP growth rates, local currencies pegged to the US dollar, high current account deficits, significant levels of foreign debt, weak banking systems, and over investment in real estate. As the US dollar strengthened, their exports became less competitive, growth slowed, there was an increase in bank failures, a collapse in foreign investor confidence with a consequent run on currency resulting in financial crisis. The natural reactions were to float local currencies and implement restrictive fiscal and monetary policies. This would lead to slower economic growth and deferral of major infrastructure projects. The demand for oil products in these particular areas was now lower than originally forecast, with a minor impact in other areas such as China, Hong Kong, Japan and Singapore, where the new 1998 forecasts were depressed but to a lesser extent. Despite this slowdown, the growth rates in the developing Asian countries are still outstripping the rest of the world, with forecast of 3 to 3.5 per cent growth predicted for 1998.
The impact of basestocks on lubricant performance
Ian Morris (general manager, Research & Technical Services, Mobil Oil Co. Ltd, UK)
Mobil has accumulated over 100 years of experience in formulating products from a variety of basestocks, and this presentation sought to identify the relative benefits of solvent refined and hydroprocessed basestocks, as well as polyalphaolefin (PAO) synthetic fluids. The preferred mineral basestock for many product ranges would consist of predominantly iso-paraffins and naphthenes with a balance of aromatics and sulphur for the optimum levels of solvency and oxidation stability. Lubricant basestock manufacture was described, together with the effect on the molecular composition by using hydrogen treatments of varying severity. Since hydrotreating can only be used for the lower viscosity products (up to 500 neutral, or VG 100), it is necessary to incorporate a certain amount of heavier solvent refined material for some of the heavier industrial and engine oil applications. The formulations of several product types were discussed in some detail, including hydraulic fluids, turbine oils, circulating oils, commercial engine oils, passenger vehicle engine oils and marine engine oils. Selection of the correct additive treatment was critical in order to achieve optimum performance in any particular type of basestock. The speaker highlighted recent moves towards type III (severely hydroprocessed/isomerised wax) and type IV (PAOs) basestocks in engines oils in order to meet the demands of current specifications.
The outlook for paraffin wax
Joe Rousmaniere (vice president, Sinocon Petroloeum Company)
Figures were presented for the global supply/demand for paraffin wax. Most was used for candles, there being a substantial increase in the requirement for decorative candles, although this was balanced by a reduction in the requirement in China due to the increasing degree of electrification. This led to an unbalanced supply situation, with shortages in the developed countries, but surpluses in China and Asia. The surplus wax emanating from China was not generally acceptable elsewhere, since quality standards were low. Not only did the Chinese wax fail to meet food grade requirements of the more developed countries, but the method of packing was inconvenient and unacceptable elsewhere. This had led to a collapse in prices for Chinese semi-refined slab wax from 500 USD/MT in December 1996 to USD/MT in December 1997. There were also problems with securing long-term supply commitments, but the Chinese had now recognised these problem areas, and were making progress in overcoming them.
The major problem that still remained was the absence of any disciplined national policy on quality and pricing. Further pressures in the US market were being caused by the trend towards the manufacture of unconventional basestocks. This was reducing the availability of paraffin waxes since these new processes did not yield wax by-products. Also, the use of slack waxes as cat cracker feedstocks further reduced the availability of raw material. Because of these shortages in the USA, wax prices had continued to increase, whereas prices of the equivalent base oil fell. These differences were expected to be at least maintained or even increased in the short/medium term at least. Because of the buoyant market, there was a general consolidation of thecandle-making industry in the developing countries, with the construction of larger plants which benefited from economies of scale, as well as investment in automation, etc. Because of this, there is an increasing requirement for bulk liquid wax, as opposed to the slab variety.
To summarise, the Chinese supply situation was critical to the viability of the world wax market, with a huge potential for greater uptake if the products were more sophisticated. Wax would continue to be regarded as being a special chemical, and would not be relegated to the status of a commodity item.
Outlook for the South American base oil market
Raul Barri (head, Special Products Area, YPF SA, Argentina)
It is essential to understand that the various countries comprising South America are very different in colonisation, population, cultural influences, economic development, and with different degrees of political and economic integration. Two main blocks were established consisting of the Andean Pact (Venezuela, Colombia, Ecuador, Peru, Bolivia, Chile having now left) and Mercosur (Brazil, Argentina, Uruguay and Paraguay), these two blocks having very different developments. The current situation is that Chile has finished its economic transformation process, and Argentina is about to complete its process. Brazil is at an advanced level and Venezuela has begun a similar process. However, Brazil is the natural leader of the region and is largely responsible for influencing the growth rates of others in the region.
Production of paraffinic base oils is concentrated in Brazil (Petrobras total 700,000 mta distributed between two refineries), Venezuela (Maraven total 630,000 mta distributed between four refineries), Argentina (YPF La Plata, 210,000 mta and Shell 90,000 mta) and Colombia (55,000 mta). The majority are not operating to capacity due to a combination of technical difficulties and market factors. The consumptions are 720,000 mta Brazil, 220,000 mta Venezuela, 213,000 mta Argentina, 135,000 mta Colombia, 100,000 mta Chile, 85,000 mta Peru, 63,000 mta Ecuador and 8,000 mta Uruguay. A considerable amount of cross-border trade exists in basestocks.
Brazil and Argentina are of particular interest in that Brazil has recently derogated the monopoly Petrobras had regarding the importing of basestocks. It is anticipated that Argentina can now develop its export trade into Brazil, as can Venezuela, both countries enjoying the benefit of zero import tax through the Mercosur agreements.
Basestock supply and demand in North America
James C. Cavill (vice president, US Lubricant Sales & Marketing, Safety-Kleen Corporation, Illinois)
Again, the US outlook is not particularly bright at the moment for base oil. Prices had moved downwards during the period January 1996 to November 1997 and had not followed the traditional relationship to the price of crude oil. New plants had added to the oversupply problem in a flat or even diminishing market, although it was hoped that development of international sales could bring some relief. Also, some shakeout of older plants anticipated by the year 2000 would improve the situation. The oversupply situation was worst in the case of the lower viscosity grades. The three main drivers were plant rationalisations, the world petroleum markets and quality issues. Additions to the USA manufacturing plant during 1997 were Pennzoil/Conoco (18,000 bbl/d) and Petro Canada (7,000 bbl/d). Closures were Unocal (4,700 bbl/d) and Lyondell (paraffinic only 4,000 bbl/d). A number of plant rationalisations/joint ventures/closures were in prospect. Although world demand for petroleum was confidently expected to again increase for the 13th consecutive year, refinery margins were poor, and the geographic demand patterns were shifting. Quality issues were primarily driven by the 850m gallon passenger car motor oil market, since OEMs continue to develop new and advanced engines and transmissions which made more demands on the lubricant.
Increasing demands were also being made by the need for improved hydraulic oils and heavy duty diesel. This was increasing the quality shift towards Group II and Group III basestocks, which again favoured the hydrocracked and ISPO dewaxed manufacturing processes. During the ensuing extended question and answer session, the speaker made the following additional observations. Price of VGO would increase, driving up base oil price further. If increased investment were not made in the refineries, the VGO would be diverted to produce motor fuel and middle distillates. Re-refined basestocks were now accepted as Group I basestocks and having low carcinogenicity. A high proportion was therefore now being used in lubricants. Future investment must concentrate on unconventional base oil (UCBO) manufacture.
The agreements made at the recent Kyoto conference on reducing emission levels of greenhouse gases would not necessarily result in consumption of petroleum products. Also it was anticipated that the US demand for energy would continue to grow. The future for Group III basestocks were very much dependent on the Noack volatility being above or below 15 per cent. The use of synthetics would increase, and could be blended with older basestocks to met new requirements. The manufacture of UCBOs reduced yield by some 20 per cent which would help the oversupply situation, although it was claimed that Petro Canada is currently making a Group III basestock with no yield reduction.
Brazilian base oils market
Guilherme P. G. Franca (special products manager, Petroleo Brasileiro SA)
Much of the background to the situation in Brazil had already been covered by the previous presentation on South America. Not unnaturally, much of this particular presentation concerned the recent decision by the Brazilian Government to deregulate the base oil market after August 1997, and also of the new role of Petrobras after deregulation. Before deregulation Petrobras enjoyed a monopoly on the supplying, importation and exportation. Finished lubricants markets were controlled by the Government National Fuels Department (DNC) who fixed and controlled base oil prices. Only paraffinic bases were produced; naphthenics were imported. After August, this situation changed completely, when Petrobras needed to compete with foreign trade. New plant would be commissioned early next year, which will concentrate on the manufacture of upgraded basestocks, mainly Group II. Further upgrades were scheduled for 2002 although the technology had not yet been decided. Customs duty still applied to products imported into Brazil, at 14 per cent for products from Europe and the USA. This would be reduced to 12 per cent after January 1998, and also be subjected to a further reduction of 3 per cent each year. Petrobras was not involved in rerefining, which was currently being performed in Brazil by a number of private other companies.
Global base oil markets
Alan Gelder (consultant, Chem Systems Limited)
The speaker reiterated and substantiated the general situation which had been apparent during a number of the previous presentations, i.e. Western Europe and North America show no or only low growth after historical decline, whereas the demand growth is centred in the emerging economies of Asia and South America. The upset to previous shorter term predictions was the economic slowdown in Asia, which could make the present downturn more severe than expected. This again confirmed that near term events could not always be reliably forecast, whereas longer term trends are more predictable, being driven by fundamentals which are not so readily disrupted. Other key uncertainties were in evidence over and above the traditional linkage for lubricant demand with GDP growth. Some were negative, e.g. longer drain intervals, whereas others were positive, i.e. increasing energy intensity of the emerging economies. The golden rule for base oil supply was "only the right plant in the right location will be viable over the long term. Maximum economic returns also rely on getting the timing right".
Base oil scenario in India current and future
Shri P. Sudarsanam (executive director, Indian Oil Corporation Ltd, Mumbai (Bombay))
The Indian economy was based both on agriculture and industry. No government controls had been applied on import of basestocks, additives and finished lubricants since 1992. Since the per capita consumption of lubricants only amounted to 1kg per annum as against a global average of some 7-8kg per annum there was significant potential for expansion. For example, the vehicle population was expected to double by the year 2000, although a high proportion of this would be of the minimalist 2- or 3-wheeled variety. The current growth rate of 3.5 per cent annually in lubricant requirements was expected to continue for at least another decade, rising from 992,000 mta to 1,351,000 mta. Assuming a base oil demand equivalent to 90 per cent of the finished lubricant requirement, current production of 642,500 mt for 1996/1997 and 705,000 mt estimated for 1997/1998 showed a deficit. Also, all three current base oil manufacturers used conventional solvent refining processes, therefore the quality/performance aspects were not up to international standards.
There are plans to introduce iso dewaxing or catalytic dewaxing stages to existing refineries to improve quality. New hydrocracker-based plants are in the planning stage which will produce a further 550,000 mta. Imported base oil, which is totally decontrolled, is still subject to 32 per cent duty however. All current refineries are in the public sector and prices are fixed by government on a monthly basis. There are 69 rerefiners currently operating in India, with a total nominal capacity of some 250,000 mta. Most use the old acid wash process and there is increasing environmental pressure to close them. There is a problem with the collection of waste engine oil, much of which was disposed of illicitly, or burnt in furnaces and kilns.
Many of the major players have long term strategies to invest in India in lubricants, then branch out into refining, natural gas and distribution. The process of privatisation started three years ago, and of the refineries currently under construction, two are in the private sector.
Review of US basestocks business
William R. Downey, Jr (business manager, Kline & Company)
The speaker again highlighted that the main drivers for lubricants in the USA were industrial oils, consumer automotive and commercial automotive. For passenger cars, the ILSAC GF-2 and 3 performance requirements were dictating base oil quality levels, with double digit growth predicted for: 100N, Group II, High VI; 100N, Group III; 150N, Group II, High VI.
For commercial vehicles, although basestock issues have been limited in the recent API CG-4 specification, the upcoming PC-7 will have more impact, requiring more 150N, Group II, 95 VI.
Base oil supply and demand were in balance in 1995, but the new capacity has resulted in oversupply. All of the current basestocks suppliers were listed, together with tonnages, and an economic evaluation exercise endeavoured to identify which plants would be at risk. To conclude, some nine plants were identified as being at risk, possibly for shutting down or change of ownership. In 1997, some of these predictions came into effect, in that two refineries closed and two have been sold, although there are still a further six plants in the "at risk" category.
Base oils Nigeria
Jorge Santos (director, Logos Trading)
Nigeria is the largest black nation on earth with over 100 million population. It is the economic locomotive of West Africa, with most business activity centred in Lagos. Before 1983, when the Kaduna refinery was commissioned, base oils were imported and blended locally into finished products. After 1983, importation was discouraged by the application of high import duties, although a thriving black market developed when shortages subsequently became apparent. The use of base oils only (without additives) as engine and gearbox oils became an established practice. Consumption of bright stock increased in an attempt to reduce high engine oil consumption resulting from the use of poor quality lubricants. A further change in consumer habits was the illegal practice of using 100 SN for cosmetic purposes, i.e. the manufacture of body creams and lotions. Subsequent problems at the Kaduna refinery through lack of maintenance reduced production which eventually came to a halt, following a disastrous fire, and importing was re-established.
However, whereas in 1983/1984 the majors supplied the market almost exclusively, today the independents have obtained 60 per cent of the market. The speaker described at some length the inefficient bureaucratic system which made normal business transactions extremely difficult and protracted. Statistics were hard to come by and were of questionable accuracy, but the speaker considered that in earlier years the base oil consumption of around 200,000 mta had now reduced to 120,000 mta.
Following the presentation, the speaker was challenged by some Nigerians for having portrayed an incorrect evaluation. Not only had the system improved over the past few years, and had shown stable growth since 1994, but there had been a large amount of foreign investment over the last three years, which showed a measure of confidence. The figures quoted for base consumption were wildly incorrect, current consumption being in the order of 250,000 to 300,000 mta. The government was also embarking on a programme of reconstruction of the Kaduna refinery, as well as programmes to improve standards of living, education, etc.
Naphthenic base oils, process oils and a supplier's responsibility
John P. Maurer (manager, Speciality Sales, Ultramar Diamond Shamrock, USA)
Naphthenic products are manufactured at the Three Rivers Refinery, Texas, using local crude oil, which is eminently suitable for naphthenic basestocks. This refinery produces some 2,100 bbls/d, which is about 4 per cent of the US market of 51,900 bbls/d. The products, being very naphthenic, have very low viscosity indices and are extremely good solvents. They are mainly supplied to rubber compounders, ink manufacturers, the explosives industry, adhesive manufacturers, speciality fuels and speciality fluids manufacturers. Unlike paraffinic oils, naphthenics involve more simple technology and R&D costs, which is the primary attribute towards their historical low price. Although used predominantly on account of their high solvency power, some of the medium VI are used to produce API "SA" motor oils, where low price is the key factor. The requirement for these low grade motor oils is still surprisingly high in the USA; if all of the naphthenic motor oil volumes were changed to paraffinic based, then the excess capacity of paraffinic base oils could be virtually eliminated. However, business prospects for naphthenics are better related to the process oil market, where long term supply relationships can be established, since "base stock interchangeability" is not a factor. Many customers, such as synthetic rubber compounders and adhesive manufacturers, require months of research to properly evaluate candidate raw materials. Practical examples of individual development projects were quoted, also the supplier must be proactive and anticipate customer requirements.
The base oil supply and demand situation in Western Europe
Manfred Fuchs (chairman and chief executive officer, Fuchs Petrolub Group)
The speaker presented a very comprehensive summary of the world's lubricants business. On a world average, virgin base oils account for 89 per cent of finished lubricants and process oils. Global demand in 1996 was 38.1 million tonnes, including bunkering and marine oils, with Western Europe representing only 13.7 per cent of the world demand, after North America, Australia/Oceania and Central/Eastern Europe. Some 163 refineries are operating, with a name-plate capacity of 46.1 million tons. In terms of national markets, the largest are the USA, Russia, China and Japan, with Germany being the largest individual consumer in Western Europe. Per capita consumptions show wide variations, with Western Europe holding a middle place at about 13 kg/annum as opposed to 1-2 kg/annum in India and China, for example.
There is little growth potential in Western Europe, where demand has been flat for almost 20 years, with an almost equal balance between automotive and industrial lubricants. However, in most other markets, automotive lubricants predominate. Almost 26 per cent of Western European base oils are exported, mainly as basestocks and to a lesser extent as finished products, which makes the Western European base oil market dependent on the world situation. Main recipients were Asia, Africa, with smaller volumes to South America and elsewhere. Refinery capacity utilisation was only 80 per cent, which would have been reduced to 53 per cent without exports. Some 63 per cent of these lube refineries are owned by the multinationals, followed by national or state-controlled companies, then independents. Comparing SN 150 to crude oil, prices and differentials showed low levels in 1993 and the first half of 1994, with a recovery in 1995 and a marked decline in 1996 and 1997.
On a global basis, there is some 15 per cent overcapacity equating to some 10 or 20 base oil refineries, this overcapacity being based mainly in Western Europe, Central and Eastern Europe and North America. The BP/Mobil refinery at Llandarcy will close, DEA will do likewise with one of its two units and ADDINOL will stop operating its base oil facility, these accounting for some 580,000 tpa. This trend will continue in Western, Central and Eastern Europe as well as in North America. Although there is a clear shift towards the production of unconventional base oils, with a 9.8 per cent reduction in Western Europe demand forecast from 1997 to 2002, prices for these products are likely to stay low for some years in spite of the resent recovery from the very low 1996 levels.
Successful rerefining in practice
Ing. Fabio Dalla Giovanna (refinery director and project manager, Viscolube Italiana SpA)
Viscolube, specialists in rerefining, had formed an alliance with IFP, specialists in petrochemical and refining technology, and developed the REVIVOIL process for rerefining of waste oil. The waste oil is preflashed, then chemically pretreated to reduce subsequent fouling. The oil is distilled under mild vacuum, the intermediate fractions are catalytically hydrotreated. For smaller scale units high temperature thermal clay treatment can be used instead. If brightstock is also a requirement, a propane deahphalting unit can be installed to treat the residue from the distillation process. This increases the yield of the process up to 83 per cent of the original dehydrated used oil. The first process was installed in Indonesia (40,000 tpa) without the PDA treatment stage. Also, a simplified version of distillation can produced a de-metallised product suitable for use as a front-end feed for conventional refining or for use as an industrial or diesel fuel.
New perspectives for rerefined base oils in Europe
Daniele de Winter (business development manager, Viscolube Italiana SpA)
Although some 20 per cent of European lubricants are not recovered and therefore unaccounted for, the wording of Used Oil Directives 75/439 and 87/101 still allows for varied interpretation by individual member states in determining their approach to recycling. Rerefined oil currently only accounts for 5 per cent of European base oil consumption, from 19 primarily small plants of total capacity of 900,000 mta, which is currently less than 70 per cent utilisation. Old acid clay processes are being phased in favour of improved technologies which are entirely adequate for the production of toxicolgically safe products. Other characteristics of rerefined oil compare favourably with virgin oil, and due to the extra refining stages, can offer improved Noack volatilities. The US military specifications, the ILSAC specifications, some European OEMs and the Japanese OEMs all accept the use of products containing properly qualified rerefined oils.