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

API classification of base oils

VI = 80-119
Sats. <90% and/or S>0.03%

Group I
Group II

Paraffinic
Oils

Wide chemical spectrum

VI = 80-119
Sats. >90% and S<0.03%

Group III

VI > 120
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

Chemical composition of mineral base oils

Mineral base oils consist mainly of
naphthenic, paraffinic and aromatic
molecules
The relative amount of these molecules in
the oil determines whether the oil is
considered naphthenic or paraffinic
CP (IR) 42-50% Naphthenic
CP (IR) 56-67% Paraffinic
Aromatic molecules confer high solvency
to the oil, but some polyaromatic
compounds are harmful to human health,
and to the environment, so they are
removed or converted during the refining
process.

Paraffinic

Naphthenic
CH3

Aromatic

Market Drivers & Trends

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

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)

Fuel
81%

Lubricants
1%
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*
24%

Automotive driveline
application
(transmission fluids +
auto gear oils)

Hydraulic
MWF
Grease
Industrial Gear
Driveline

Global lubricant market 2014

39 M mtpa (formulated)
36 M mtpa (base oils)

MWF*
15%

Gear Oil
13%
Other Ind.
6%

Hydraulic
Fluids
22%

Grease
8%

Engine
Oils
54%

Industrial
lubricants
46%

Turbine &
Circulating
Ind. Gear
6%
Oil
6%

applications cover the largest volume

address a variety of challenging applications
include industrial, automotive and consumer
usually a high value segment
includes gear oils and transmission fluids

3.4 M mtpa
2.4 M mtpa
1.3 M mtpa
1.0 M mtpa
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
Naphthenic
8%
Gr III
4%

2015
Gr I
68%

2020

Naphthenic PAO
1%
9%
Gr III
12%

Gr I
44%

Naphthenic PAO
1%
10%
Gr III
14%

Gr I
28%

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
the region Gr I capacity

1st WAVE
North
America

200.000
In 1988 N. America
produced about 200.000
bbl/d of paraffinic Gr I

will also
reach the
Americas

Expert studies reveals

that the next wave of
closures will be in Asia

2n\d WAVE

70.000
Total capacity today is
around 70.000 bbl/day

3rd WAVE

Near Future

Western
Europe

3rd WAVE
Asia, Middle
East and
Africa

A similar trend of
closures is expected in
Middle East and Africa

-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

21

ICIS Export price listings

22

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:

Turbine oils
Neat metalworking fluids
Hydraulic fluids

Main advantages:

Main Challenges:

Good performance /lifetime

Additive technology adaptation

with right additive package (G III)

Low solvency towards deposits

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:

Naphthenics already used in

Lubricating greases

several industrial applications

Soluble metalworking fluids

Existing approved formulations

Additive carriers

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:

Main advantages:

Main Challenges:

Technical advantages of
Lubricating greases

Neat metalworking fluids

Additive carriers
Hydraulic fluids

different oils
Most similar to Group I oils
easiest conversion
Equivalent solvency but higher
purity than Group I oils

Slightly lower VI than Group I oils

Slightly lower sulphur

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?
www.nynas.com/Base-oils
www.linkedin.com/company/nynasbase-oils
Naphthenic Magazine
productfinder.nynas.com
Naphthenics base oils news letter
Mailbox with 24hr response

28

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