In 1986, Pan-American naphthenic production totaled 67,300 barrels per day. There were 14 refiners, and Exxon, Sun and Shell were the biggest players. There was a glut of naphthenic oils, said Banach.

Exxon and Shell were the largest transformer oil suppliers, Banach continued, while Sun was dominant in rubber processing oils. But their plants were old and needed upgrades, and environmental regulations posed challenges. Consequently, these three majors, along with Chevron, Diamond Shamrock, Lubricating Co. of America, Macmillan, Pennzoil, Seaview and Witco, exited the North American naphthenic market.

Government regulations and health and safety concerns were key factors in the exodus, said Banach. In the early 1980s, there was a major concern about naphthenic oils causing cancer. Vacuum distillation and mild hydrotreating were targeted; only severe hydrotreating was acceptable. Calumet invested $30 million on a high-pressure hydrotreater to stay in the pale oil business, Banach said.

By 2004, after Shell exited the market, naphthenic capacity plummeted to 39,900 b/d in the Americas. Only eight refiners were left. There was a huge shortage of naphthenics, and they became a specialty product, he said. Today, naphthenic capacity has climbed back to 53,000 b/d in the Americas, and Ergon is the major player, with 22,000 b/d of capacity.

The eight refiners producing pale oils in the Americas today are:

*San Joaquin Refining, Bakersfield, Calif.
*Valero, Three Rivers, Texas
*Calumet Specialty Products, Princeton, La.
*Cross Oil, Smackover, Ark.
*Ergon, Vicksburg, Miss.
*Houston Refining, Houston, Texas
*Rafineria Isla, Netherlands Antiilles
*Petrobras, Fortaleza, Brazil

Valeros and Rafineria Islas output is marketed by Nynas, while Calumet markets Houston Refinings production.

Six viscosity grades (SUS @ 100 degrees F) are produced in the Americas, and each grade targets specific applications, Banach continued. The light 40 vis is used for aircraft hydraulic fluids, fuel additives, fluidity modifiers for additives, and ink oils.

Almost all of the 60 vis goes to electrical transformer oils, where pale oils are favored for their low pour point, oxidation stability and flash point. Some, however, find their way into shock absorber fluids. 100 vis fluids are highly prized in metalworking applications and as rubber process oils, while 500 vis is used in adhesives and as white oil feedstock.

Greases consume half of all 750 vis naphthenics, Banach said, where their compatibility and solubility are valued characteristics. Printing ink oils also use this cut. Finally, the 2000 vis oils are used as aromatic extract replacements in rubber processing. Many tire manufacturers are global, and want their Pan-American plants consistent with Europe, where the EU has banned aromatic extracts, Banach noted.

Latin America is growing, said Larry Buck, with fantastic growth in many countries. The first core application for naphthenics in Latin America is metalworking fluids and greases. Its a huge market, but very price competitive. Chemical industries and electrical transformer oils are also core applications, very important for Americas pale oil marketers. Specialty applications include low temperature hydraulilcs, compressor oils and shock absorber oils. Emerging applications include high-performance transformer oils and aromatic extract replacements.

With only two naphthenic refiners in South America, the bulk of that continents supply comes from the U.S., shipped in bulk or in ISO tanks, flexibags and drums, Buck said.

In the future, the Americas transformer and process oil markets will keep growing, and specialties will always have a niche, thanks to the unique properties of pale oils. Heavy naphthenics will be the preferred replacement for aromatic extracts. With no plans for pale oil expansion the Americas, Buck concluded, oversupply isnt likely. The future is extremely bright for naphthenics in the Americas.