Trends in the base oil landscape- changes and opportunities - PowerPoint PPT Presentation

Trends in the base oil landscape- changes and opportunities Tribology Days, Nynäs Havsbad, October 7&8 2015 Dr. Luis Bastardo-Zambrano Prof. Thomas Norrby Nynas AB, Naphthenics TechDMS, Nynashamn, Sweden

World Naphthenic market share: A significant part of the global oil market The Global lubricant demand is 40 M Ton/y Ca. 1% of the total petroleum market Automotive Lubricants 56% Industrial Lubricants 44 % Global naphthenic potential: About 10% of total base oil demand (3.6 M Ton) (Source Fuchs Petrolub AG presentation at 18th ICIS- LOR World Base Oils conference Feb 2014 in London) Naphthenic Usage, %

Main applications of naphthenic oils (I) Lubricant Industry (30%) Lubricating greases Metal Working Fluids (MWF) As a component in other industrial lubricants (hydraulic fluids, gear oils, etc.) Electrical Industry (ELI) (30%) Insulating oils for industrial transformers Finished products for direct end use

Main applications of naphthenic oils (II) Process oils (40%) Adhesives and sealants Printing inks Battery separators Insoluble sulfur (as oil dispersion) Antifoams Tyre Industry Used as extender oil in tyre rubber Oil extended polymers

Naphthenic market in Europe Naphthenics market share (%) 25 25 Growth of 20 20 specialized products 15 15 Vanishing 10 10 of non-core applications 5 5 0 0 1974 1974 1979 1979 1984 1984 1989 1989 1994 1994 1999 1999 2004 2004 2009 2009 2014 2014

Growth in the global naphthenic capacity *Source LNG

Evolution of the global base oil pool 2019 f’cast 2012 2014 1% 1% 1% 9% 12% Group I Group I 10% Group I 26% Group II 11% Group II 13% 11% Group II 44% Group III Group III Group III 51% PAO PAO 28% PAO Naphthenic 34% Naphthenic 48% Naphthenic The global base oil demand scenario is here assumed to remain around 36 M mt/pa for the period Source. SBA Consulting

What is driving the change? Several supply related factors – external to the lubricant industry – have a negative impact on Group I plants: Mandatory clean fuel investments Clean base oil (low Sulfur, low polyaromatics) Crude oil cost and availability Volatile, long term trend? Refining economics Of scale and of method/technology “Technological paradox” Gr I more expensive to make On the demand side, as Group II and III oils are more suited than Group I oils to meet the quality demand of the automotive industry Thus, the Group II and III market is growing at the expenses of Group I oils, which are required for industrial use

However, the demand growth will not match the supply growth Independently of the way the demand will develop, without closures we are heading towards a period of overcapacity The demand outlook will only determine the size of the oversupply In the most optimistic growth scenario the excess capacity would reach 6 M mt/y In the most realistic growth scenario the excess capacity would be over 10 M mt/y

Base oil Market in Europe No closures of Group I refineries took place in 2014 Europe has 15% of the overall global base oil capacity Europe has 25 % of the overall global Group I capacity Group I closures announcements Europe for 2015: Company Location Capacity (tpa) Shell Pernis, Netherlands 370000 Total Gonfreville, France 480000 Colas Dunkerque, France 290000 Nynas Hamburg, Germany 165000

How will this affect the lubricant industry? Shrinking availability: The Group I production rationalization will push major Group I producers with own in- house lubricant production to focus mainly on production for captive use The product offering will not any longer be optimized on industrial lubricant requirements

The majority of Group I producers have an in- house lubricant business to care for…. Non -lubricant producers, 11% Lubricant producers, 89% 89% of the global base oil production thus originates from producers that have an in-house lubricant business

The “collateral damage” of the paraffinic quality shift Group II and III paraffinic oils are excellent base stocks for the formulation of modern engine oils However, Group II and III paraffinic oils display lower solvency compared to Group I paraffinic oils Moreover, there is a limitation in the maximum viscosity that can be reached in Group II and III plants Therefore, the shift from Group I to Group II and III paraffinic oils will pose challenges to industrial lubricant formulators, as it will lead to a loss of solvency and viscosity range availability

The widening Solvency Gap Solvency is an important property in most industrial lubricant applications In general, the base oil solvency affects the oil’s capability of dissolving additives, oxidation products and deposits In lubricating greases, the base oil solvency affects the soap yield and the oil-soap interaction In Metalworking fluid emulsions, the base oil solvency affects the emulsion stability

The growing high viscosity deficiency API group Light neutral Medium neutral Heavy neutral Bright stock Group I 38% 13% 33% 16% Group II 55% 25% 20% none Group III 80% 20% none none The ongoing shift in capacity will generate availability issues for heavy neutrals and for bright stocks

How is the market going to move away from Group I? Conversion to Group II or Group III? Conversion to Naphthenics ? Conversion to Group II/III – Naphthenic blends?

Nynas Oils and Group I Replacement – the new speciality base oil range

Nybase - A new specialty product range Can be widely applied in industrial lubricant formulations Main advantages Most similar product to Group I oils High degree of flexibility in blending Optional tailor-made blends readily available Superior low temperature performance Main challenges vs Group I base oils Slightly higher volatility Lower flash point Slightly lower VI

Basic requirements of the Nybase Range The Nybase™ range should: Closely match the Kinematic Viscosity and Aniline Point of a representative reference base oil range of Solvent Neutral (SN) Group I paraffinic base oils Allow industrial lubricant manufacturers, to maintain key properties of their products Allow direct replacement, with as little re-formulation and re-working of labels, PDS and other marketing material as possible (drop-in replacement) …Or allow for as easy reformulation work as possible

Viscosity Range Limitations Overcome API Group Gr. III Group III Group II Heavy Naphthenics Group II Nybase range Bright Stock Group I Group I Viscosity at 40 °C (SUS) 50 100 200 300 400 500 600 700 2500 7 20 40 58 80 100 115 140 500 Viscosity at 40 °C (cSt)

Chemical composition of mineral base oils Mineral base oils consist mainly of naphthenic, Paraffinic paraffinic and aromatic molecules The relative amount of these molecules in the Naphthenic oil determines whether the oil is considered naphthenic or paraffinic C P (IR) 42-50% Naphthenic C P (IR) 56-67% Paraffinic Aromatic Aromatic molecules confer high solvency to the oil, but some aromatics are toxic and harmful to the environment so these are removed or converted during the hydrorefining process

Base Oil Carbon Type Chart (ASTM D 2140) PAO Group II Paraffinic Nybase Multi-Ring Naphth. Aromatic Gr. I T 22 0% 20% 40% 60% 80% 100%

Aniline point — 90ºC — 90ºC — 90ºC — 90ºC — 80ºC — 80ºC — 80ºC — 80ºC — 70ºC — 70ºC — 70ºC — 70ºC 68ºC — 68ºC — 68ºC — 68ºC — — 60ºC — 60ºC — 60ºC — 60ºC — 50ºC — 50ºC — 50ºC — 50ºC — 40ºC — 40ºC — 40ºC — 40ºC — 30ºC — 30ºC — 30ºC — 30ºC — 20ºC — 20ºC — 20ºC — 20ºC — 10ºC — 10ºC — 10ºC — 10ºC — 0ºC — 0ºC — 0ºC — 0ºC

Aniline point — 140ºC — 130ºC Aniline is a polar solvent Paraffinic oils The lower the “Aniline Point” — 120ºC temperature: — 110ºC The more ”polar” the oil… — 100ºC The higher the solvent power Increasing — 90ºC solvent power Naphthenic oils — 80ºC — 70ºC — 60ºC — 50ºC Aromatic oils — 40ºC — 30ºC — 20ºC

The Nybase Range vs. SN reference base oils

The Nybase Range vs. SN reference base oils Nybase Nybase Nybase Nybase Nybase Nybase 70 SN 70 100 SN 100 150 SN 150 300 SN 300 500 SN 500 600 SN 600 Density (kg/m3) 0,873 0,849 0,867 0,859 0,871 0,868 0,886 0,876 0,889 0,879 0,876 0,880 FP COC (°C) 168 190 196 206 222 224 220 258 242 262 268 278 PP (°C) -27 -12 -24 -18 -24 -18 -21 -18 -21 -9 -15 -9 Viscosity @40 °C (cSt) 14 12 22 17 30 30 60 58 100 94 120 115 Viscosity @100°C (cSt) 3,1 2,9 4,2 3,7 5,0 5,2 7,3 7,8 10,2 10,7 12,6 12,2 VI 67 92 88 104 89 103 80 98 79 97 98 96 Aniline Pt. (°C ) 90 90 100 98 101 102 103 109 111 115 123 117 Sulfur (m-%) 0,02 0,2 0,01 0,2 0,04 0,2 0,02 0,2 0,03 0,3 0,02 0,3 CA 3 7 2 3 3 3 4 3 3 2 2 3 CN 42 27 36 32 35 33 36 32 36 31 30 29 CP 55 66 62 65 62 64 60 65 61 67 69 68 Refractive index 1,477 1,468 1,475 1,472 1,479 1,477 1,485 1,481 1,487 1,483 1,481 1,483