As the economies of Asia soak up higher volumes of petrochemical commodities – especially plastics, rubber and composites used in consumer goods and automotive materials – the next few years can expect to see global process oil demand grow even faster than automotive engine oil demand, a recent industry conference heard. But will todays process oil suppliers – especially API Group I base oil refiners – keep pace with rising demand?
Maybe not. In fact, the worlds supply of solvent-refined Group I base oil has been dwindling for some time, and has been elbowed aside by new volumes of Group II and Group III base oils. These hydroprocessed oils have the purity, viscosity index, low volatility and better oxidation stability needed to satisfy many automotive and industrial lubrication uses, but they lack the exacting physical and chemical characteristics (such as solvency, higher viscosity, saturates content or evaporative properties) that are vital to many process oil applications.
This global base oil capacity shift isnt over, as many national and multinational oil companies such as Russias Tatneft, Hindustan Petroleum in India, Chevron in the United States, SK and Repsol in Spain and Takreer in the United Arab Emirates all have projects that revolve around Group II and Group III production, according to David Moore, Ergon Europes market manager for Europe, the Middle East and Africa. But reduced Group I base oil production may also reduce the [availability] of Group I derived process oils needed by car makers for such things as hoses, tires, belts and window trims, he told ACIs European Base Oils and Lubricants Summit in Budapest in September.
Pointing to data from SBA Consulting, Moore, who is based in Waterloo, Belgium, said global base oil capacity will see an emphatic shift by 2015, when Group II production is forecast to reach almost 18 million metric tons per year, up from 11.8 million tons in 2009. By 2015, Group III base oil is expected to reach 7 million tons, up from 3.5 million in 2009, while naphthenic base oil will slightly increase to 6 million tons, from 4.7 million tons in 2009, he said. Over this same time, however, Group I capacity could slump to 16.5 million tons, from almost 30 million tons in 2009.
Generally, Moore stated, higher operating costs mean that, Group I plants cannot compete with their newer counterparts that use hydrotreatment technologies. A second reason for Group Is dramatic slide, he pointed out, is that base oil yields are sensitive to crude type, and so-called lube crudes generally cost more than fuel crudes. This cost can weigh heavily on refiners who are struggling to be profitable on the fuels side. One now-defunct Group I base oil plant in Stanlow, U.K., for example, realized just 2 percent of the refinerys output, but dictated 25 percent of its total crude intake, Moore observed. (Stanlows owner, Essar, closed the base oil unit there last year.)
By contrast, many of the worlds naphthenic base oil refineries are standalone plants. They typically yield about 69 percent process oils and 13 percent diesel, and the rest is asphalt, naphthas and other specialties, so fuel is not the overriding factor in their production economics. Ergon is the worlds largest naphthenic base oil producer, with 1.1 million t/y of capacity at its refinery in Vicksburg, Mississippi, U.S. It also owns a plant in Newell, West Virginia, U.S., that makes Group I and II paraffinic base stocks, giving it a perspective from both sides of the aisle.
Process or pale oils have extensive application in industrial and consumer goods. They are used in adhesives that go into construction materials such as tapes, flooring and sealants, along with hot melts and tackifiers. They go into printing inks, paints, agricultural spray oils, hoses, belting, mats and sheets, conveyors and shoe soles.
The list goes on, Moore said: Process oils go into resins, PVC, and plasticized rubbers such as thermoplastic elastomers and EPDM (ethylene propylene diene monomer) – which are used extensively in automotive, construction and gardening applications. Process oils are also used in textile processing and for production of titanium dioxide wash oils.
Each application has distinct needs, Moore indicated. Polymer producers, for example, need a broad range of processing aids that includes process oils, chemical peptizers, factice (vulcanized vegetable oil), fatty acids and esters, process resins and waxes, and liquid polymers.
Different polymers require different types of oils, such as paraffinic, naphthenic and aromatic to optimize compatibility, he explained. Ergons naphthenic process oils for this application range from 3.5 centiStoke to 900 cSt at 40 degrees Celsius, and include bright stocks.
Lots of polymer process oils today are heavier than lighter, Moore said. Because of environmental concerns and restrictive legislation, many producers are now cooking polymers at around 100 to 105 degrees C.
Polymer manufacturers buy a lot of process/extender oil, a sort of modifier that lowers the viscosity of uncured polymers in order to improve the processing ability, he explained. It helps to reduce process temperatures, power consumption and overall [production] cost, by increasing the volume. Ergon has found that using extender oils also allows the incorporation of dry ingredients such as fillers, and tends to make the finished vulcanized products softer and less sensitive to low temperatures.
These benefits are especially important in the competitive field of rubber automotive materials, where the prevalence of just a few polymer formulations underscores the importance of process oils for these commodities. The major families of automotive polymers include styrene butadiene rubber (SBR), natural rubber, EPDM, and thermoplastic elastomers (TPE).
About 70 percent of the styrene butadiene rubbers – emulsion SBR and solution SBR – end up in production of tires, so the automotive industry is one of the biggest consumers for process oils, Moore said. Some 30 percent of tires are sold into the original equipment manufacturer market while 70 percent go into the replacement market.
These figures show that it is strategically important for an SBR tire or a polymer producer to be nearby a car factory, he noted. On a global level, these producers are expected to migrate to the East to countries such as Russia, India and especially China, which is forecast to gain huge market share in both vehicle and tire production. Ergon research shows that SBRs use of process oils is approximately 37 percent of the rubbers volume.
Natural rubber (also known as India rubber or caoutchouc) is also used in production of tires, especially truck tires, and its process oil consumption is similar to that of SBR. If you look at the growth rates of some of these products, natural rubber production fluctuates with synthetic rubber depending on price and harvests, due climate conditions in the traditional caoutchouc producing countries such as Malaysia or Thailand, Moore said.
The automotive industry uses EPDM polymers for hoses, under-hood components, door and window seals and more. Heres where the ratio of process oil-to-polymer really climbs, up to 1:1. This product can be highly extended with fillers and plasticizers, therefore providing lower costs. It is an important polymer that many manufacturers focus on, Moore said.
Finally, TPE is a family of products that are replacing EPDM in some applications and their process oil loading is between 10 and 20 percent of the polymer content. They consume less oil and are low aromatic, highly saturated products.
Global consumption of elastomers in 2012 reached 28 million tons, of which natural rubber accounted for 11 million tons, Moore estimated. That left a slate of synthetic rubbers to share nearly 60 percent of the market, including SBR and PBR (polybutadiene rubber) with 5.3 million tons and 3.2 million tons, respectively. The next biggest types are SBC (styrene block copolymers) with 1.7 million tons, butyl rubber with 1.5 million tons, and EPM and EPDM (1.3 million tons together). Next were nitrile, polylsoprene and chloroprene rubbers (700,000, 639,000 and 419,000 tons, respectively); other elastomers accounted for the rest.
At present, he added, this market is worth U.S. $37 billion. Citing data from the British Plastics and Rubber Organization, Ergon believes the rubber market will expand at a compound annual growth rate of 4.3 percent through 2015, while its value could hit $56 billion by 2020. In the plasticized rubbers segment, Moore said, TPE is expected to shine especially bright, growing 5.5 percent a year through 2017, while the automotive polymers market share in 2010 was 60 percent and is set to grow, per market research firms Freedonia Group and LMC International.
There are some unknowns, Moore noted. For one thing, tire manufacturers are under pressure to reduce the rolling resistance of their products, in order to reduce fuel consumption and vehicle emissions. Tire designs – and their requirements for polymers and process oils – could change as a result.
Still, given the rising tide of vehicle ownership, construction needs and other consumption patterns around the world, Moore concluded that process oil demand is on track to grow faster than even engine oil demand. And with changes coming in Group I availability, naphthenic process oils will be in a strong position to meet those needs.
Lube Report Asia occasionally includes articles originally published in sister publications of LNG Publishing Co. This article appeared in the December 2013 issue of LubesnGreases – Volume 19, Issue 12 – under the headline, Process Oil Demand Picks Up Steam.