Transformer Oil Market

Market Overview

The transformer oil market size was valued at $2.71 billion in 2021 and is expected to reach $4.70 in 2030 growing at a CAGR of 6.31%. Factors such as extension of electricity networks in developing nations and expansion of international commerce in electricity significantly drives the transformer oil market demand by 2030.

Transformer oil is often known as Insulating oil, it is a component in electrical transformers and serves the dual purpose of also being a coolant. These oils are produced by a method known as fractional distillation, and they are generated from crude oil. They have a variety of beneficial features, including great di-electricity, high resistivity, thermal conductivity, little power loss, and chemical stability, to name a few. It plays a significant part in ensuring that the power supply transformer operates without any hiccups and in meeting the energy needs of commercial and industrial establishments as well as residential ones.

The functioning of transformers results in the release of heat, which, if not properly managed, can cause harm to the system. As a result, oil is utilized to ensure the transformer continues to function normally by protecting it from the damaging effects of heat. In addition, transformer oil is used in the circuit breakers and switches utilized in high-voltage electrical systems. Additionally, trains and power generation also make use of transformer oil in their operations. Therefore, the market for transformer oil is picking up speed in the industry, and there is a need for it in a variety of applications, including small transformers, bigger transformers, utilities, and other applications.

Market Dynamics

Global Transformer Oil Market Drivers

Extension of electricity networks in developing nations

The growth of electric grids in developing countries as well as the modernization of electric grids in developed economies because of growing industrialization and urbanization are the primary factors that will drive the growth of the global market for transformer oil over the course of the forecast period.

It is anticipated that investments made by developing economies in the expansion of transmission and distribution systems and grid networks will accelerate the potential increase in power demand that may occur because of the rapid industrialization and urbanization that is occurring in the region. Because of the development of the grid network and T&D system, new transformers and switchgear will need to be installed. This will lead to an increase in the demand for transformer oil throughout the course of the projection period.

In the year 2020, Asia is expected to account for around 44.5 percent of the worldwide investment in the T&D system. This places Asia in the lead for the T&D investment. This investment will go toward grid expansion, the replacement of aging transmission and distribution facilities, and grid reinforcement. In addition, transmission and distribution investment in the Indian subcontinent is expected to rise at a compound annual growth rate (CAGR) of 6.72 percent between the years 2020 and 2030, which would constitute a significant expansion of the region's electric grid network. Developing economies in the APAC area are making investments in the development of transmission and distribution systems and grid networks in order to satisfy the possible rise in power demand that may result from the fast industrialization and urbanization that is occurring in the region. The increase in the size of the grid network and the T&D system will lead to the construction of new transformers and switchgear, which will in turn lead to an increase in the demand for transformer oil.

One of the most important elements will lead to a rise in the installation of transformers, which would, in turn, be expected to lead to an increase in the demand for transformer oil around the globe. In recent years, the expansion of the market has also been contributed to by technological advancements and an increasing number of research and development initiatives undertaken by prominent industry players. This, in turn, is expected to propel the transformer oil market growth over the course of the forecast period.

Global Transformer Oil Market Restraints

Environmental issues related to the use of transformer oil with a mineral basis

Because of its high efficiency, easy availability, and its useful chemical properties such as a good pour point at low temperature and exceptional thermal cooling capacity, naphthenic mineral oil has long been the most preferred transformer oil. This is because of its high efficiency, easy availability, and its useful chemical properties. Because of its remarkable resistance to oxidation, the use of paraffinic mineral oil has been increasingly widespread during the past several years. However, both the paraffinic and naphthenic varieties of mineral oil are products of extremely refined, purified, and processed petroleum, and as a result, they are extremely resistant to biodegradation. The biodegradability of the mineral oil ranges from 0 to 40 percent, and it is derived from a resource that does not replenish itself. Both the developed and the developing economies throughout the world are currently undergoing a shift toward the adoption of technology that are environmentally friendly and green. This shift might prove to be a barrier to the widespread use of mineral-based transformer oils in the not-too-distant future, and it could act as a constraint on the market for mineral oil in the long run.

Global Transformer Oil Market Opportunity

Expansion of international commerce in electricity

Commerce in electricity across international borders has been picking up steam in recent years, and the number of economies that are taking part in this trade has skyrocketed over the course of the last several decades. For instance, the European Union (EU) is making preparations to construct a pan-European power grid while simultaneously strengthening the power systems of each individual country. Recent discussions at the Indian Energy Exchange (IEX) have focused on the possibility of establishing an integrated power market for the South Asian region. This would be accomplished by facilitating the trade of electricity across international borders between countries such as Myanmar, Bhutan, Sri Lanka, Bangladesh, and Nepal. In the next years, these new advancements are anticipated to result in the extension of the grid network as well as the installation of new transmission lines. This will lead to an increase in the demand for transformers and switchgear, as well as for transformer oils.

Regional Analysis

By region, the global transformer oil market is segmented into North America, Europe, Asia Pacific, Latin America, Middle East.

The Asia Pacific Dominates the Global Market

Over half of the entire volume was sold to customers in Asia and the Pacific in 2016, making this region the most important consumer market. One of the primary drivers that are driving the demand for such items is the growing necessity of emerging nations like India, Vietnam, Thailand, and Indonesia to modernize and alter their current infrastructure for the distribution of power.

In terms of the Asia Pacific market, China had around 44 percent of the total share. The majority of cities in China are well equipped with electric poles, and connection lines, and have vast distribution networks. This creates the need for upkeep and repair of equipment by applying effective oils since the majority of the cities in China are well prepared.

North America is predicted to develop at a modest pace due to the maturing of the manufacturing and industrial sectors, particularly in the United States and Canada. As a result, North America has emerged as the world's second-biggest consumer market. The upgrading of technology and the modernization of existing transformers are two factors that, in conjunction with the falling price of crude oil, are predicted to promote growth in the country.

Segmental Analysis

The global transformer oil market is segmented by product, application and region.

By Product Analysis

In 2016, oils derived from minerals emerged as the most popular product, accounting for more than 82 percent of the total volume share. Its widespread use in applications such as capacitors, high voltage switches, and circuit breakers is due to its ease of availability as well as its high level of compatibility with a large variety of different pieces of equipment. This sector is further broken down into two sub-sectors: naphthenic base oils and paraffinic base oils.

Because of its inexpensive price and widespread availability across a variety of worldwide locales, the paraffinic base oil is commonly used. Crude naphthenic oil can only be found in a handful of nations, including China, Brazil, Australia, the United States of America, and Venezuela, which limits its ability to penetrate the industry on a worldwide scale.

It is anticipated that bio-based oils would emerge as the items with the highest rate of growth, with an approximate CAGR of 14 percent between the years 2017 and 2025. It is anticipated that the expansion would be favorably influenced by stringent environmental restrictions regarding energy usage and emissions, as well as substantial expenditures in the renewable energy industry.

Silicones have better thermal stability in comparison to mineral oils; but, because of their expensive price and limited availability, their application on a broader scale has been restricted. On the other hand, this product is gradually displacing traditional mineral oils due to the fact that it possesses superior qualities and is compatible with many pieces of machinery.

By Application Analysis

In 2016, the market for transformer oil was dominated by small-scale transformers, which accounted for more than 48 percent of total sales. These systems are put to significant use to satisfy the ever-increasing demand for power in confined urban or rural regions where space is at a premium.

The tremendous expansion of the category may be attributed, in large part, to the increasing urbanization and electrification of rural regions in Southeast Asian nations like as India, Bangladesh, and Sri Lanka. In recent years, people have shown a greater tendency to make bulk purchases as a means of offsetting the high expenses involved with intricate filling operations. This has contributed to an increase in both market volume and sales.

From 2016 to 2025, it is anticipated that the large-scale category would expand at a compound annual growth rate of 11.1%. Due to the introduction of stringent environmental rules, which have promoted reduced carbon emissions and improved energy efficiency, there is a significant increase in demand for transformers that are friendly to the environment. The expansion of this market sector has been driven by developments in technology, higher levels of industrial production, and ongoing research and development efforts to provide more efficient energy-generating and recovery equipment.

The creation of renewable energy relies heavily on the use of various utilities. Transformers of this type are typically used in conjunction with solar power plants and windmills, and more specifically for offshore wind energy generation. Additionally, the equipment requires maintenance oils that are able to withstand high levels of humidity and air pressure, in addition to other harsh environmental factors. It is projected that this category would expand at a more gradual rate compared to the growth of the other two segments.

Recent Developments

• In order to provide its clients in the Western United States retro-filling services for its Envirotemp line of dielectric fluids, Cargill, Incorporated teamed up with Delta Star, Inc. in May 2021. According to the agreement, Cargill, Inc.'s service centre for the Western US market is Delta Star, Inc.
• The firm and Aevitas, Inc. have teamed up to expand market access to premium transformer oil products in Canada starting in May 2021. As a consequence of this collaboration, Aevitas, Inc. will be the exclusive distributor of the company's new arctic grade transformer oil in Canada. With its remarkable low-temperature performance and high oxidation stability, the new Caltran brand of arctic-grade transformer oil is perfect for usage in frigid climates like Canada.
• A contract was signed in December 2020 between Chevron Lubricants and Petrol Ofisi, the Turkish distributor of lubricants. Due to this development, Petrol Ofisi will produce and market Chevron Lubricants goods in Turkey under the Texaco name. The industrial and automotive lubricants from Chevron Lubricants are included in the offering.
• The storage capacity at the Antwerp port in Belgium has been extended beginning in October 2020 by Ergon International, Inc., a branch of Ergon Refinery, Inc. 39,000 m3 will be the capacity following the enlargement. This growth was made to ensure that the company's clients would always have access to specialty oils.
• The Daqing refinery in Heilongjiang province, China, had its capacity for processing crude oil increased in September 2020 by PetroChina Company Limited. The refinery's annual capacity was increased from 6.5 million tonnes to 10 million tonnes. The development, which was part of an investment of RMB 4.45 billion (USD 651 million), is expected to increase the output of transformer oil.