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Who Needs Naphthenic Base Oils?


Global demand for lubricants – including naphthenic and paraffinic mineral oils, synthetic fluids, vegetable oils and specialty oils – has been constant at approximately 36 million tons per annum for the past five years. Naphthenic oils make up 7 to 8 percent of this market, with worldwide demand in 2003 estimated at close to 2.8 million metric tons.

Thirty years ago, this scene was quite different, with naphthenic oils satisfying over 20 percent of the worlds demand. So is there really a future for naphthenic oils when new, more sophisticated oils are rapidly gaining market shares?

Yes, there is! The secret lies in the very special properties of naphthenic oils. Naphthenics are the logical choice whenever an application can benefit from one of the following properties:

High solvency.

Excellent low-temperature properties.

High compatibility to certain resins or polymers.

For the lubricants industry, perhaps the most valued property of naphthenic oils is their high solvency. In fact, the decrease in the solubility of the new highly refined paraffinic oils even strengthens the need and options for using naphthenic oils – primarily for metalworking fluids, but also for greases and industrial oils.

Where They Go

Naphthenic base oils typically serve three important markets:

1. Transformer oils, which provide the cooling and electrically insulating media in transformers;

2. Process oils, which are used in a great number of chemical processes due to their excellent solubility; and

3. Lubricating oils, which are used to manufacture metalworking fluids, greases and industrial lubricants.

Projected market development for these varies by application. The demand for transformer oil, for example, is a function of growth in electrical demand overall. As many regions are experiencing rapid growth and development, an overall increase in demand for electrical oils is expected.

The chemical industry is seeing an increased use of naphthenic oils as a solvent. So, demand should continue to grow in this segment, too.

Growth in the lubricant industry is linked to industrial development and the gross domestic product. Regions with significant industrial growth, or boom economic periods, should see an increase in demand for naphthenic oils. However, as these indicators are somewhat cyclical, the demand for lubricating oils is expected to remain flat.

This article focuses on the lubricants market, and I will not elaborate in depth on either the transformer oil or the chemical process oil market, although these applications represent roughly 70 percent of the naphthenic market.

Naphthenics Edge

Metalworking fluids are by far the most important application for naphthenics in the lubricants sector. The two main functions of metalworking fluids are cooling and lubrication, or a balance between the two.

Without going into detail, it is generally accepted that naphthenics in soluble oils have a higher tolerance to formulation changes than paraffinics due to their better solvency characteristics. Superior emulsion stability and good cooling and filterability are considered as the main advantages of naphthenics in water-based fluids. As far as neat oils are concerned, naphthenics are favored over paraffinics, especially in formulations with high concentrations of additives.

The grease market is also significant. Mineral oils, both naphthenic and paraffinic, are the most widely used base fluids for greases. The base fluid selected should display a moderate solvency toward the thickener being used. The viscosity of the base fluid is typically 80 to 250 cSt at 40o C, although it is sometimes lower or higher for special applications.

In greases, lower viscosities tend to give better low-temperature properties and better heat transfer, but more bleeding, lower load capacity and higher volatility. Conversely, higher viscosities tend to give less bleeding, better load capacity and lower volatility – but worse low-temperature properties and heat transfer capability.

As can be seen in Table 1, both naphthenic and paraffinic oils have pros and cons, and it is generally a good mix of both that will have the optimum properties.

First Choices

So where is this market going? Its helpful first to differentiate three types of applications. Foremost are Key applications, where naphthenics show superior technical performance over paraffinics, such as transformer oils, rubber, metalworking fluids (water-based fluids and neat oils with a high level of additives), greases, etc.

Secondary applications are those where naphthenics are technically equal to paraffinic oils, such as neat oils with a small levels of additives.

Last come Non-naphthenic applications, where naphthenics are used only for economical reasons, such as monograde motor oils. These applications, mainly in the oversupplied United States, will disappear in the future as naphthenics increasingly tend toward the price range of paraffinic Group I oils. In the past the surplus naphthenics capacity in the United States resulted in discounted sales to non-naphthenic applications. Today, naphthenic producers focus on applications supporting a technical premium over paraffinics, and prices are already equal or slightly higher than Group I paraffinics.

The demand for naphthenics has decreased over the last couple of years due to conversion to paraffinics or other better-performing fluids in non-naphthenic applications. However, it is expected to pick up again mainly thanks to Asian recovery and growth. Asia is today over-paraffinized and will require more soluble (naphthenic) oils in the future. We will also see a transfer of demand from Western Europe to Central and Eastern Europe.

On the downside, we will see the U.S. naphthenic market decline rapidly; their use for non-naphthenic applications will be phased out as their price increases, making them equally or even more expensive than paraffinics. This is a repeat of the so-called West European scenario. In the 1970s, naphthenic oils represented roughly 20 percent of the total base oil market in Western Europe. Naphthenic base oils were cheaper than paraffinics until the mid-80s and consequently were also used in applications where they brought no real technical benefits, only cost reductions. I see a similar development happening in the U.S. market, with naphthenics demand flattening out to slightly above 10 percent of the total base oil demand.

Due to delivery cost and availability issues, the pricing of naphthenic oils varies globally, which affects how each region uses them (see Table 2). In regions where naphthenic oils are cheaper than alternative products, they will be used even in non-naphthenic applications such as monograde motor oils. However, as prices increase, naphthenics in these applications will gradually be replaced by better-performing fluids.

Coming Changes

Here are the general, market and technological trends that I see affecting the future of naphthenic oils.

Regional imbalances – due to naphthenic refinery closures and continued growth in the Asia-Pacific region – will create a tight market with a slight deficit in production expected by 2007. Additional incremental capacity increases will address this temporary supply-shortage situation. This is already happening; capacity increases by several U.S. operators like Ergon, Calumet, San Joaquin and Nynas are filling the vacuum left by Shell. Add to this that usage of naphthenics for non-naphthenic applications will decrease drastically as naphthenic demand settles into its niches, and clearly we will see a more balanced situation within one to two years.

Replacement of aromatic oils in the tire industry is a hot topic these days. Several alternative oils are proposed, such as mild extraction solvates (MES), treated distillate aromatic extracts, and naphthenic MES. Obviously a major changeover is not expected to happen tomorrow, but many manufacturers are expected to adapt their production to new EU legislation prior to the Jan. 1, 2009 deadline. Naphthenic MES already meets the technical requirements and will boost the global demand for naphthenics.

The drive towards more environmentally friendly products will continue, and more refined oils with longer lifetimes and better oxidation stability will be required.

On the technological side, we will see a drive towards the use of unconventional base oils, with less solvency power, for automotive lubricants. Consequently there will be a need for solvency improvers – that is, naphthenics. The relative loss of solvency power can be critical for certain lubricant formulations, such as water-miscible metalworking fluids or neat oils with high levels of additives. Grease formulations must also be reviewed for this reason, either by increasing the naphthenic oil content or adapting the types of fatty acids used. Many reformulations are ahead of us.

Another trend is globalization of specifications. Equipment manufacturers are dictating global availability of components, and its a challenge and opportunity for global suppliers to respond to this prerequisite.

Global demand for metalworking fluids, particularly removal fluids, will shift from straight oils to water-miscible fluids. The installation of new, faster machinery needing more cooling increases the demand for water-soluble metalworking fluids. This trend creates great opportunities for naphthenics. The booming markets of China andCentral Europe (and in the longer term India and Eastern Europe, which historically use mainly paraffinics) will also need more soluble oils.

The need to reduce mist formation levels will have an impact on water- miscible metalworking fluids – another area of opportunity for naphthenics.

Finally, how will the new production technologies – i.e., the introduction of very-high-viscosity-index base oil manufacturing and, soon, gas-to-liquid technology – impact the naphthenic market? These new production methods for paraffinic oils will create a lack of high-viscosity grades between 150 and 1000 cSt. Naphthenic production does not have these negative side-effects and naphthenic bright stocks will be very much appreciated, for grease production for instance.

Final Forecasts

In the short term – one to three years – the global demand for naphthenic oils will drop, due to a rapid fall in the United States in applications where naphthenics have no real technical advantage. However, during this period the Asian market and to a lesser extent also Central and Eastern Europe will start to pick up and will need naphthenics for core applications, such as transformer oils and water-based metalworking fluids.

The big expansion in the naphthenic market will probably come at the end of the decade when proposed EU legislation for banning the use of aromatic oils in tire manufacturing is adopted. Today the booming transformer oil market is thirsty for low-viscosity oils, but the market could shift to be hungry for high-viscosity grades for rubber compounding in the not too distant future.

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