Rosy Outlook for Pale Oils

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LONDON – The potential market for naphthenic base oils will grow by 50 percent, from about 5 million tons in 2010 to 7.5 million tons in 2020, a Nynas executive predicts. Pale oil demand already exceeds production capacity.

The world has enough naphthenic crudes from traditional sources and emerging ones, Jean-Marie Toullat, marketing director with Swedens Nynas, told the ICIS World Base Oils & Lubricants Conference here last month.

After seeing their conventional markets shrink significantly from the 1970s to the 1990s, naphthenic producers today are finding salvation through specialization, expanding their product ranges in applications where naphthenics have technical advantages.

Since the 1970s, Toullat said, not less than 15 naphthenic production units have closed down. In 2009, a dozen suppliers had combined capacity of nearly 3.5 million metric tons per year. The largest included Ergon (900,000 t/y); Nynas (750,000 t/y, including its own plus the Valero and Rafineria Isla output that Nynas markets); PetroChina (over 600,000 t/y); Calumet (350,000 t/y); and San Joaquim (275,000 t/y).

In Europe, naphthenics share of the total base oil market declined from about 22 percent in 1974 to around 7 percent by 1990, he continued. During the 1980s, the low viscosity index of naphthenics made them unsuitable for automotive lubricants, and certain poorly refined grades with high aromatic content simply vanished from the market. Pale oils stayed only in core segments, where they offered technical advantages.

Over the past two decades in Europe, product development was very active, said Toullat. The specialization trend has accelerated and will continue.

Specialization, he emphasized, for naphthenic suppliers, means multi-specialization. It means having one or several specialties for every application – having many different products. Examples of this specialization in Europe include:

Metalworking fluids, where solvency is required for stable emulsions. Viscosity around 20 cSt at 40 degrees C.
Greases, where both solvency and low temperature properties are desired. Viscosity above 100 cSt at 40 degrees C.
Hydraulics, where low temperature properties are desired; viscosity below 20 cSt at 40 degrees C.
Polymers, where solvency provides better compatibility. Pale oils are excellent for thermoplastic elastomers. Viscosity above 100 cSt at 40 degrees C.
Tires, where heavy naphthenics and special blends are aggressively seeking to replace aromatic extracts.
Rubber and printing inks, where solvency is essential.
Transformer oils, where low temperature and other naphthenic properties are ideal.
Agricultural applications, where solvency and health, safety and environmental properties are critical.

Naphthenic suppliers have developed strategies and products to fulfill needs in these and many more areas, Toullat said.

In the United States, as in Europe, naphthenics increasingly are used only in applications where they display a technical advantage. As recently as 1993, naphthenics accounted for more than 20 percent of the U.S. base oil market, but with the reduction of such non-core applications as monograde motor oils, pale oils share has leveled out around 15 percent.

In Asia, unlike Europe and the United States, naphthenics never went through a commodity market phase, said Toullat. Future development will take place directly as a specialized market. He pointed to a possible shortage of heavy products in Asia, where API Groups II and III base oils dominate local paraffinic production.

There are clear advantages to specialization, Toullat continued, including stability of markets and close ties to customers. But there is a cost. Specialization requires more resources, including a highly competent sales force, strong technical support, numerous customer contacts, and close attention to trends in many different market segments.

He predicted that the next five years will see significant growth of specialized products. Drivers for growing naphthenic demand include tire oil development (replacing aromatic extracts worldwide), Group I rationalizations causing a shortage of high viscosity products; and development of new processes such as Groups II and III, and gas-to-liquids, which also will not deliver high viscosities.

Naphthenics will play an increasing role in lubricants, process oils and transformer oils, particularly where health, safety and environmental challenges are a factor, Toullat said.

But, he asked, is specialization the answer only for naphthenics suppliers? Group I producers are facing today the same dilemma as the naphthenics producers 30 years ago, Toullat said. Their market is shrinking, and their products are less and less adapted to their changing market, particularly for automotive lubricants. Perhaps their solution is the same: specializing, with a focus where the properties of Group I products give a clear advantage.

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