Market Topics

Can Synthetics Hold Their Ground?


It would be exaggerating to say that these are difficult times for polyal-phaolefin producers. Demand is growing at a healthy clip, and has been for the past five years.

But at each turn, PAO producers face some difficult choices. Downstream, PAOs best customers are expected to be tempted by lower-cost, high-performance gas-to-liquids base stocks in the not-distant future. And upstream, PAOs go-to feedstock – the linear alpha olefin known as 1-decene (C10) – is becoming both costlier and scarcer. And that wont change anytime soon, warns Shell Chemicals Sean Clarry.

Just eight plants in the world make PAO for lubricants, notes Clarry, Shells Houston-based product manager for higher olefins. Innovene, formerly part of BP Chemicals and now owned by Ineos, operates the worlds two largest PAO plants, at La Porte, Texas, and Feluy, Belgium. ExxonMobil Chemicals two PAO plants (Beaumont, Texas, and Gravenchon, France) rank next, while Nestes facility in Beringen, Belgium, just edges out Chevron Phillips Chemicals Cedar Bayou, La., plant. Two smaller players, Chemturas plant in Elmira, Ontario, and Russias Nizhnekamskneftekhim, round out the octet.

Shell Chemicals does not make PAO, but it has the worlds largest LAO plant, at Geismar, La., so it keeps a close watch on PAOs, which consume 80 percent of the global supply of 1-decene. Speaking in early December to the ICIS- LOR Pan American Base Oils & Lubricants Conference, Clarry pointed out that all PAO producers are on edge due to developments in gas-to-liquids base stocks. They and others fear a repeat of the 1990s, when hydro-cracked and wax isomerized API Group III mineral oils became widely available, and cracked PAOs hold on the synthetic motor oil market.

GTL-type stocks are already here in small amounts, synthesized from waxy feedstock made at Shells plant in Bintulu, Malaysia. But commercial quantities are coming fast. The first large-scale GTL base stock plant, a Qatar Petroleum, Sasol and Chevron joint venture, is to begin shipping product by the end of 2008. Close on its heels will be GTL base stocks from Shell, ConocoPhillips and ExxonMobil. The impact of these new barrels is unknown, but the risk is such that investment in making low-viscosity 4, 6 and 8 cSt PAO (the fighting weights for making lubricants) has been pulled back, Clarry said – and naturally, so has investment in decene.

Our understanding is that no low-vis PAO investment is planned from now to 2010, Clarry stated. The feeling is that new PAO capacity is not needed, and the threat of GTL base stocks makes investment unappetizing.

Investments in high-viscosity PAOs, on the other hand, are being green-lighted, although the volumes are smaller. In December, Chemtura announced a 15 percent capacity increase in high-vis PAO production at its Elmira facility, slated to come on line in the second quarter of this year. Elmira makes highly saturated, linear branched polymers, useful as high-viscosity synthetic gear oils and as viscosity modifiers, for example.

Chevron Phillips and Innovene likewise have expanded their high-vis PAO product lines, and beefed up their technical support. And ExxonMobil Chemical at last is beginning commercial startup of a new line of high-viscosity PAOs, said to have extremely beneficial pour points compared to polyglycols and conventional PAO. The launch of this material from the companys plant in Beaumont was delayed by hurricane damage, but is now under way, indicated Mark Hagemeister, the companys senior staff research engineer, who also spoke at the conference.

Source of Worry

Even with the GTL issue looming, Clarry said, a more immediate problem for PAO producers lies upstream, in the supply of feedstock for PAO plants.

Traditional linear alphaolefin producers such as Shell and Innovene designed their plants to make a wide range of LAO molecules, from light-weight C4 to C8, to lube-friendly mid-weights like C10 (decene) and C12 (dodecene), and up into heavies such as C14 to 24. Each of these weights had broad markets and uses. The C14 to C24 weights, for example, are used in making lube additives; C16 to C18 are good for oil field chemicals; C4 to C8 go into polyethylene co-monomers, primarily for making plastics.

The more recent development, Clarry said, is that there is more activity and focus on single-cut technologies. He showed how nearly all the research and patent work in the past six years has been focused on single-cut LAO technologies, and none for making C10, he added. This is because there is only 2 percent overall growth in the lubricants market, and the GTL threat on the horizon.

Currently, for every ton of LAO made, some 10 to 11 percent of the output is decene. Going forward, the new plants will drive toward higher concentrations of co-monomer, and little or no C10.

Meanwhile, older full-range plants are being shut down. Czech producer Spolane closed its full-range plant in2003, and Innovene shut down its Pasadena, Texas, plant at the end of last year.

Clarrys suggestion to PAO producers: Nows the time to diversify your olefin feedstocks, using C6, C8, C12 and C14 in place of some decene. Unlike decene, C12 and C14 seem to be in good supply. Although most of these molecules have in the past gone into manufacturing synthetic detergents, the detergent market is under extreme cost pressure, and LAO now is relatively disadvantaged in the detergents market, he explained. This means more will be available for PAO manufacturers.

Chevron Phillips Chemical, for one, already has moved along that path, having invested several years ago in developing high-vis PAOs based on C12 and C14. Its research shows dodecene PAO to have some strong advantages, such as lower NOACK volatility – especially important in formulating the low-viscosity automotive engine oils, such as 0W-XX and 5W-XX multigrades, gaining favor among automakers.

Strategies for Lubes

Looking ahead, Clarry suggested two strategies for using wider ranges of olefin feedstocks. First, producers might try a mix of C8, C10 and C12 LAO to make PAO that is essentially the same as C10-based PAO. This would broaden the feedstock options for PAO, and produce products with similar specifications. This option has been tested in the past, so its not entirely unfamiliar. The drawback, conceded Clarry, is that C8 supply is tight now, and synthetic lubricants will have to vie with the high-growth co-monomer market for C8.

A second strategy, he added, is to develop new PAO products, based on the different feedstocks. This would broaden the supply, and may even create high-value products for certain niches. But such new products are unlikely to be a drop-in for many applications, so retesting, reformulating and new approvals may be needed.

In any case, as upstream producers shift to more light alpha olefins – C4 to C8 – the middle- and heavy-cut alpha olefins will be under pressure to contribute an equal level of return on investment, especially at the older, full-range plants, Clarry feels.

Shell probably wont reinvest in LAO production again in this decade, he added. And he doesnt expect anyone else to invest in decene capacity either, given the general apprehension over GTLs approach.

Whats more, Clarry predicts more PAO capacity may be shuttered. Already, there are signs that PAO demand for decene is beginning to exceed supply. As decene capacity is rationalized, there will be less to feed into the PAO maw. This means some PAO production units will become less efficient – and in todays chemical industry, that often spells closure.

In PAO, 60,000 to 65,000 tons will need to be rationalized in the next few years, he foresees. Thats about the scale of one large PAO unit.

Related Topics

Market Topics