The Role of Re-Refining
The Role of Re-Refining – The role of used oil in the marketplace has evolved over the past several decades, both regionally and globally. New processing technologies combined with ongoing improvements in feedstock quality has created the opportunity for used oil to become the source to produce premium quality base oils.
Currently, companies are producing re-refined base oils that align with the requirements for Group I, Group II and most recently Group III qualities. They are now capable of formulating low SAE grade engine oils and marketed as semi- and full synthetic.
Re-refined base oils are also sustainable as they represent a closed loop process where used oil is collected, processed, formulated, and re-used in low-, mid- and high-tier performance applications. Because the base oil does not degrade, it can be returned to the same closed loop process indefinitely. This is good for the environment.
Used oil that is collected from oil dealerships and oil change shops has a significant base oil component, ranging from 65% to 75% depending on the source point and the collection process. These sites will also have a higher base oil quality profile as they are normally associated with low SAE grade and/or top tier performance qualities where higher quality Group II and Group III base stocks are normally used.
Used oil is therefore considered by some as a more valuable feedstock to crude oil, the latter where base oil yields can range from 0% to 20% depending on the crude source and processing technology. It has been reported by companies like Safety-Kleen that re-refining can produce up to 78% less carbon dioxide equivalent (CO2e) versus a crude based refinery. This can have a significant benefit to the industry as the process reduces greenhouse gas emissions.
Re-refining still represents a small portion of total base oil nameplate capacity at approximately 4.0% of global paraffinic nameplate capacity at 2,111.7 ktpa. This represents re-refining operations with a minimum nameplate capacity of 25 ktpa and hence not necessarily representative of the entire re-refining industry. That said, nameplate capacity of larger re-refining plants has increased by 27.8% over the past decade with North America and Western Europe representing the largest capacity. The highest percentage of re-refining base stock nameplate capacity is Group II quality where the market share of global capacity is 5.2% or 1,226.8 ktpa, while the lowest percentage is with Group III base stock production at 0.9% or 68.3 ktpa. The re-refining of Group I base stock quality is 3.8% of global nameplate capacity, or 816.6 ktpa. This has been the main production mode with the re-refining process over the past 50 years, but has been shifting towards higher performance Group II and Group III with the continuing growth in low SAE grade and higher performance engine oils where these base stocks are typically used.
Brazilian outlook
In Brazil, there are many companies that re-refine used oil to produce base stocks. Most of these are smaller companies who produce Group I qualities and would be “under the radar screen” from reporting companies like LNG.
According to the Information obtained from Brazilian Magazine Lubes em Foco, in 2022, there were 13 companies that reported base oil production from re-refining operations in Brazil with production ranging from 221 tpa to 143,442 ktpa according to ANP. Lwart is the largest base oil producer in Brazil and the only company that produces Group II quality. Its market share is estimated at 52.7%, the remaining 12 companies representing a combined 47.3% market share and Group I quality.
Re-refining remains a key source of base oil production in Brazil, representing % of domestic production. In 2022, the production of re-refined base stocks in Brazil was reported as 313,718 MT representing a 44.9% increase since 2016 when reported production was 216,519 MT.
Opportunities for the re-refining industry
The opportunities for growth remain bright for the re-refining industry. There are an estimated 25 plants globally with capacities more than 20 ktpa with key regions including North America, Western Europe, and Southeast Asia. Nearly 60% of re-refined base oil production is now Group II and Group III quality, and this will continue to grow with improvements to both feedstock quality and processing technologies. Interest in re-refining continues to grow with new operations expanding into non-traditional regions such as Southeast Asia and Central America.
The quality opportunities can be demonstrated in the following table that provides an overview of the quality and type of base stocks used to formulate various passenger car engine oil grades.
In the past, the primary SAE viscosity multi-grades were SAE 10W-30 and SAE 20W-50. These were normally formulated with Group I base stocks including but not limited to S150N, S600N and Bright Stock. These base stocks were normally lower in Viscosity Index, contained sulfur and had a lower concentration of saturated to aromatic components. This is important to the re-refiner and the re-refining industry as it is typically the aromatic molecules in the base stock that degrade during use and contribute towards the formation of sludge, varnish, and deposits.
Automotive industry drives the market
The automotive industry has continued to move towards the use of higher performance products where fuel economy, reduced emissions, extended drain, and engine cleanliness are key attributes. New North American performance categories are on the horizon for both the passenger car and heavy-duty engine oil markets, including but limited to ILSAC GF-7 (2025), PC-12 (2027) and a new dexos1® Generation 4 performance standard from General Motors that is planned to replace the recently introduced dexos1® Generation 3 standard (September 2022) by 2027. Similar performance category advancements continue in Europe through ACEA and selected Original Equipment Manufacturers (OEM) line Mercedes Benz and Volkswagen.
The impact of the changing performance landscape in the automotive industry with the quality of base stocks that are required for engine oil formulations are shown in the following table.
The major theme for base stocks is the continuing drive towards higher levels of saturated components and the reduction/elimination of aromatics. Saturates is directly linked to several performance features that are highly desirable in the automotive industry, namely, (i) higher Viscosity Index, (ii) lower volatility (at constant kinematic viscosity), (iii) lower Cold Cranking Simulator (CCS) viscosity (at constant kinematic viscosity) and (iv) improved oxidation performance when properly formulated with an appropriate antioxidant or performance additive package.
Not surprisingly, the quality of base stocks that are required for the automotive industry has shifted over the past several decades from solvent refined Group I to hydroprocessed and hydrodewaxed Group II and Group III. These Group II and Group III base stocks contain a high concentration of saturated material that are chemically stable and do not degrade significantly during use. This is reflected in the used oil that is collected and re-refined. In fact, there is an excellent opportunity to recover most of the original base stock during the re-refining process that should increase processing yields over time and continue to contribute as a sustainable process.
Over the past decade (2012 to 2022), the global nameplate capacity for Group II and Group III base stocks has increased by 76.0% and 95.5% respectively and combined represent nearly 60% of paraffinic base stock capacity at 647.6 ktpa (Group I, 435.9 ktpa, Group II 487.0 ktpa, Group III 160.6 ktpa).
The shift towards lower SAE grades for improved fuel economy requires lower kinematic viscosity and higher Viscosity Index base stocks to formulate these grades, most of which are synthetic or semi-synthetic in nature. As previously noted, this transition towards the increased use of hydroprocessed Group II and Group III base stocks in the automotive industry has led to the continued improvement in used oil feedstock quality that is collected for re-refining. This has provided the opportunity to produce Group II, Group II+ and now Group III base stock qualities on a regular basis through the re-refining process. This is noteworthy in regions and countries with higher demands for top-tier performance and lower SAE grade engine oils. This includes North America, Western Europe, and Brazil.
In North America, the continuing shift towards the use of lower SAE grades has significantly impacted the average quality of base stocks that are produced by the re-refining industry.
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