Base Oil Seminar

Nov 21th 2016 Bucaramanga

Base oil market and drivers

Dr. Luis Bastardo-Zambrano,

Naphthenics TechDMS
Luis Bastardo-Zambrano

2000 Chemical Engineer, ULA

Mrida, Venezuela

Nov. 2000, Stockholm, Sweden

2005 PhD Degree Surface Chemistry,

KTH Stockholm, Sweden

2005-2006 rhus University Denmark

Nynas AB:
2006 Project Manager
2008 Technical Coordinator LUB
2010 Technical Manager LUB
2015 TDMS Manager
Outline

API Groups I to V and their applications

A brief overview of base oil markets and trends
A closer look at naphthenic base oils and
Nynas new group I replacement base oils

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API classification of base oils

VI = 80-119
Group I Sats. <90% and/or S>0.03%
Wide chemical spectrum

Paraffinic VI = 80-119
Group II Oils Sats. >90% and S<0.03%

VI > 120
Group III Sats. >90% and S<0.03%
Narrower chemical spectrum

Group IV PAO Specific molecule type

Group V All other oils

Sats. = Saturates; paraffinic and naphthenic, not aromatic molecules

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Chemical composition of mineral base oils

Mineral base oils consist mainly of

naphthenic, paraffinic and aromatic Paraffinic
molecules
The relative amount of these molecules in
the oil determines whether the oil is Naphthenic
considered naphthenic or paraffinic
CP (IR) 42-50% Naphthenic
CP (IR) 56-67% Paraffinic CH3

Aromatic molecules confer high solvency

to the oil, but some polyaromatic Aromatic
compounds are harmful to human health,
and to the environment, so they are
removed or converted during the refining
process.
 Market Drivers & Trends

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 Average annual oil prices 1987-2040 (2012 USD/b)

Oil price defined as average WTI

price delivered to Cushing,
Oklahoma
High Oil Price case: faster
growth + high demand + lower
production
Reference case: business as
usual
Low Oil Price case: slower
growth + investments in resource
development + higher OPEC
production

Source: US Energy Information Administration Annual Energy Outlook 2016

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 Source: www.economist.com

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What are the causes of the oil price drop?

Trends in supply and demand

Changes in OPEC objectives

Receding geopolitical
concerns about supply
disruptions, e.g. Iran deal

Unrest in Nigeria

U.S. dollar appreciation

Source: www.nasdaq.com (Nov 21st , 2016)

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Global lubricants demand reached 39.4 M Ton/y,
equivalent to only 1% of the world wide oil consumption

Global oil consumption 3.9 G Ton/year (2014)

Lubricants
Fuel 1%
81%
Gas
8%
Coke
4%

Asphalt
Chemical 3%
Feedstocks
3%

Marine oil included

Data 2013-2014
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Global industrial lubricant market 15.5 M mtpa

HTF/ATF* Hydraulic
Automotive driveline
24% Fluids Global lubricant market 2014
application
(transmission fluids +
22% 39 M mtpa (formulated)
auto gear oils) 36 M mtpa (base oils)

Gear Oil MWF*

Engine Industrial
13% 15%
Oils lubricants
54% 46%
Other Ind. Turbine &
6% Circulating
Grease Ind. Gear 6%
8% Oil
6%

Hydraulic applications cover the largest volume 3.4 M mtpa

MWF address a variety of challenging applications 2.4 M mtpa
Grease include industrial, automotive and consumer 1.3 M mtpa
Industrial Gear usually a high value segment 1.0 M mtpa
Driveline includes gear oils and transmission fluids 5.6 M mtpa
 Group I remains the primary base stock for
the formulation of industrial lubricants
Group III; 1%
PAO; 5%

Group II; 18%

Group I; 54%

Naphthenics; 22%

Global Industrial Lubricant Market

by Base Oil Type 2013 (approx.
16.5 million tons)
Source Kline
Evolution of the global base oil pool
Where is your supply going?

2007 2015 2020

Naphthenic PAO Naphthenic PAO
Naphthenic 1%
Gr I 9% 10% 1%
8%
68% Gr I Gr I
Gr III Gr III 44% Gr III 28%
4% 12%
14%

Gr II
20%

Gr II
34% Gr II
47%

The global base oil demand scenario is here assumed to remain around 36 M mtpa for the period

Source Nynas, Kline, SBA Consulting LLC

New Group II/III capacity expected over the next five
years, will lead to an over-supply situation

2015:
over 1.65 M mtpa new Group II/III capacity installed
2017-2018:
5 M mtpa new Group II/III capacity is expected to come on stream
Additionally:
2 M mtpa are expected to be added as capacity creep
More Group II/III projects are at the planning stage
This will create an oversupply situation over the period, as
demand is not expected to grow at the same rate

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The Group I capacity reduction will continue

Group I plants have higher costs compared to Group II/III and a much
lower crude flexibility
so some Group I plants are likely to close, other will be forced to operate
at reduced throughput to contain inventories
To achieve a reasonable supply/demand balance, at least 10 M mtpa of
older high cost capacity needs to close over the next 5 y
equivalent to 35 average sized Group I plants
During 2015
9 Group I plants have closed, with loss of ~2.4 M mtpa capacity
Most of the closures took place in Europe
Group I plant closures will increase faster in the near future
one more Group I plant closure announced for 2017 in Japan

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Closing Time
1 MILLION TONS
Gr I capacity disappeared from
Europe in 2015, almost 25% of
Near Future
the region Gr I capacity Expert studies reveals
that the next wave of
1st WAVE
North
closures will be in Asia
America
200.000
In 1988 N. America 2n\d WAVE
produced about 200.000 Western
bbl/d of paraffinic Gr I
70.000 Europe 3rd WAVE
Total capacity today is Asia, Middle
around 70.000 bbl/day
East and
Africa

3rd WAVE A similar trend of

will also closures is expected in
reach the Middle East and Africa
Americas

-7.6
MILLION TONNES
Global Gr I capacity
declined by more than
7.6 Mill Ton/y
from 2007 to 2015
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

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The widening Solvency Gap
Solvency is a very important property in industrial lubricant
applications
In general, the base oil solvency affects the oils ability of
dissolving
Additives (usually polar species)
Oxidation products
A high solvency prevent varnish or deposit formation
In lubricating greases, the base oil solvency affects the
soap yield and the oil-soap interaction
In Metalworking fluid emulsions, the base oil solvency
positively affects the emulsion stability
The widening Viscosity Gap

API group Light neutral Medium neutral Heavy neutral Brightstock

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
Solvent Neutrals and for Brightstock
This is already evident from the price development of Brightstock and SN
500/600 and Group II N 500 SUS (12 cSt @ 100 C) in markets across the
regions

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ICIS Export price listings

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 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?

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 Conversion to Group II and III

Conversion to Group II more common in Asia and North America

In Europe preference towards Group III

Main industrial applications: Main advantages: Main Challenges:

Turbine oils Good performance /lifetime Additive technology adaptation

Neat metalworking fluids with right additive package (G III) Low solvency towards deposits
Hydraulic fluids High availability (G II) High cost
 Conversion to Naphthenics

Conversion from Group I to naphthenics most common in Europe

Main industrial applications: Main advantages: Main Challenges:

Lubricating greases
Soluble metalworking fluids
Additive carriers
Naphthenics already used in
several industrial applications
Existing approved formulations
Available additive technology
High solvency towards deposits
Higher volatility than Group II
and III oils
Lower VI than Group II and III oils
 Conversion to Naphthenics/Group II or III blends (Nybase)

Nynas is the only company globally offering this alternative

Main industrial applications:
Lubricating greases
Neat metalworking fluids
Additive carriers
Hydraulic fluids
Main Challenges:
Main advantages:
Technical advantages of
different oils Slightly lower VI than Group I oils
Most similar to Group I oils Slightly lower sulphur
easiest conversion
Equivalent solvency but higher
purity than Group I oils
To summarize

The ongoing developments in the global base oil industry will lead to a significant
change in the base oil pool
In particular, the global availability of Group I paraffinic base oils will decline, in
favour of Group II and III oils
This will primarily impact industrial lubricant producers, due to reduced availability of
solvency and viscosity
The market has already started adjusting to the new scenario, and alternatives are
available.
Naphthenics represent a valid solution, both as viscosity and solvency providers.
Additionally, there are evident synergies between naphthenic oils and Group II/III
paraffinic oils
More information?

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base-oils

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