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PAOs Bulk Up


Demand for polyalphaolefins has boomed this year and last, both buyers and sellers say. We saw demand in 2010 come back strong, right after the 2009 recession, and this year has been even stronger. Its back up to where it was in 2006 or 07, but supplys very tight, one Houston-area seller of the synthetic base stock said last month. Its hard to get. Really hard, echoed a lubricant blender from the Midwest. Eventually I can get what I want, but the cost is very high.

These and other market participants are cheering recent news that greater volumes and heavier grades of the synthetic hydrocarbon are on the way. Only seven companies make PAO (save those who make it under exclusive tolling agreements) and this year saw them hard-pressed to meet demand.

PAO may represent less than 2 percent of the worlds lubricant supply, but it fills one of the highest-value niches. With a cost thats typically three to five times that of conventional mineral oils, it is used to boost performance in a number of automotive and industrial lubricants, through low-temperature flow, fuel economy, oxidation resistance, shear stability and reduced volatility. The nearest substitute in many applications is API Group III mineral oils, which cost much less but do not quite match PAOs performance in some key areas.

Group III enjoys a great price advantage, and anyone who can use Group III in their application, by and large has switched already, pointed out one longtime marketer, speaking not for attribution. But where the best low-temperature properties are required, down to minus-60 degrees C, PAO is still the answer.

Group III also has been in tight supply this year, which helped goose PAO demand, but that will change soon as numerous new refineries in the Middle East and Asia come on stream. Many PAO sellers are moving now to defend their space against this longtime rival. Many are working to bring more and better PAOs to market, while another longtime participant is selling up and heading for the exit.

Recapping the News

Announcements on PAO capacity have all but tripped over each other in the past few months.

In July, Chemtura announced it would increase output of its Synton brand high-viscosity PAO, by building a new plant in the Netherlands. Engineering work has begun on the plant, located in Ankerweg, Amsterdam, and production of 40 and 100 centiStoke PAO should get under way in 2013. Earlier in 2011, Chemtura also debottlenecked production of the same 40 and 100 grades at its plant in Elmira, Ontario, Canada. Chemtura did not disclose the size or cost of the Amsterdam project, but LubesnGreases estimates Elmiras PAO capacity to be 15,800 metric tons per year.

Chemtura is increasing capacity and establishing a European manufacturing capability for high-vis PAO in order to meet the increasing global demand for these products and locate production capacity in a region of significant demand growth, said Sean OConnor, president and general manager of Chemturas Petroleum Additives division. Production in Europe allows us to further enhance our service levels and continue to meet our commitments to our customers.

On Sept. 16, Chevron Phillips Chemical said it had agreed to buy the Beringen, Belgium, plant of Neste Oil. Commissioned in 1991, Beringen makes PAO grades 2 through 10 cSt and has 60,000 t/y of capacity. Add that to the 48,000 tons at Chevron Phillips own plant in Cedar Bayou, Texas, and the two sites will advance it to third place among PAO producers, after Ineos Oligomers (at 202,500 t/y) and ExxonMobil Chemical (144,500 t/y).

Price of the Beringen acquisition was not disclosed, and the parties are in a quiet period as the deal awaits final regulatory approval. When the announcement was made, the companies said they hoped to close the transaction in a few months; at this writing in mid-October there was no update on the timetable.

Neste Oil, meanwhile, is throwing over the PAO business in favor of its arch-rival Group III mineral oils, which it makes in Porvoo, Finland, and in Bahrain at a newly minted plant with joint-venture partner Bapco. Its third Group III plant, co-owned by Takreer, is rising in Abu Dhabi and will open by 2014. With a projected 1.3 million t/y of Group III capacity at these three sites, Neste certainly wont thirst for high-quality base stocks.

This divestment gives Neste Oil an opportunity to focus on the development of its high-performance base oils business in those market segments which are growing strongly and where Neste Oil has distinct competitive advantages, said Matti Lehmus, executive vice president for oil products and renewables at the Finnish energy company.

Those who are familiar with the Beringen PAO plant were not surprised that Neste Oil decided to divest it. The plant at times had difficulties in obtaining linear alpha olefin (LAO), the building block chemical for making PAO, sources told LubesnGreases; it was especially disadvantaged versus PAO producers who are upstream-integrated into LAO, such as Ineos Oligomers and Chevron Phillips Chemical.

Five days after the Chevron Phillips and Neste Oil announcement, ExxonMobil Chemical stole a bit of their thunder by unveiling plans to build a new unit at its huge refining and chemical complex in Baytown, Texas, to make 50,000 metric tons a year of high-viscosity PAOs. Due to stream in 2013, the Baytown unit will join existing ExxonMobil Chemical PAO plants in Beaumont, Texas, and Gravenchon, France.

While declining to disclose the constructions projected cost, Habib Quazi, ExxonMobil Chemical vice president, synthetics, told LubesnGreases, It does represent a relatively large investment for synthetics. I can say that it is in the range of several hundred million dollars.

Baytown will employ ExxonMobil Chemicals own metallocene process to make high-molecular-weight 40 cSt, 100 cSt and other mPAO grades sold under the SpectraSyn Elite brand. The Houston-area location got the nod after a very comprehensive review, because it fit the companys need for availability of feedstock, infrastructure, scale, site integration and logistics. It also satisfied our need to have a business continuity plan in place, in case of a hurricane or other potential disruption to our facility in Beaumont, said Quazi. We wanted to separate our high-viscosity PAO assets from Beaumont as well, he added, recalling how that east Texas plant was walloped by Hurricane Ike in September 2008, and out of commission for months afterwards.

He added that ExxonMobil Chemical is absolutely not planning to close Beaumont once the new plant is in place. We spent a large amount of money after Hurricane Ike to rebuild, and its a world-scale plant, Quazi said. We hold Beaumont as a strategic asset in our portfolio.

Getting an Assist

Baytown is not ExxonMobil Chemicals only commitment to high-vis PAO, Quazi pointed out. Last year, Albemarle Corp. began making 15,000 t/y of high-viscosity mPAO in Pasadena, Texas, under exclusive contract to the company. Albemarle is an important partner, and the Pasadena asset offers us the flexibility and strategic advantages that we need, he said. Noting that the feedstock, catalyst and processes used in Pasadena are all ExxonMobil technology, and will be matched exactly in Baytown, Quazi said that the output from both plants will be entirely interchangeable, with no difference in performance, so blenders will get consistent supply from both.

He went on to add, When this [Baytown] project is built, we will have the worlds largest capacity for making high-viscosity PAO, and we believe we will have sufficient capacity to serve our customers need for the rest of the decade.

Chevron Phillips Chemical also has pursued the toll-manufacturing route. Earlier in 2011, it added 15,000 t/y of high-vis PAO capacity in the United States, via a toll manufacturer whose identity it declines to reveal. These new materials, sold under the Synfluid brand, are being made via a proprietary metallocene catalyst process using a C8 monomer (octene), so they do not divert decene from other PAO production.

CP Chems new toll capacity, plus the Albemarle Pasadena plant and the Chemtura Elmira debottlenecking are all helping to meet near-term need for PAO, but are they enough to permit future growth? According to Quazi, The underlying demand for synthetic lubricants, especially for high-viscosity PAO, can expect to see growth of 6 to 8 percent a year, driven by the need for high-performance lubricants. We believe demand will be quite robust for the foreseeable future.

The Decene Hurdle

That rosy future could dim if LAO feed-stock supply doesnt keep pace with PAO plant expansions. LAOs are monomers derived from ethylene, and the most desirable one for making PAO is C10, decene. Others such as C8 (octene) and C12 (dodecene) have also been pressed into service with good results, and some producers may blend various monomers rather than use straight cuts. But 90 to 95 percent of the worlds decene is used to make PAO, because a trimer (C10+C10+C10) gives an ideal 4 cSt base stock, with an excellent balance of viscosity index, low-temperature performance and low volatility.

Only three LAO companies make decene for the merchant market: Chevron Phillips Chemical, Shell Chemical and Ineos Oligomers. Unfortunately, Ineos predecessor, BP, closed one of its three LAO plants in 2005, in Pasadena, Texas, which snugged up the decene supply considerably. Ineos still has large decene operations in Belgium and Canada, but the supply hasnt recovered from that hit.

The gap was filled partly in November 2010, when the giant 345,000-ton Q-Chem II LAO plant opened in Qatar. A joint venture of Qatar Petroleum and Chevron Phillips Chemical, this full-range normal alphaolefins plants capacity includes about 42,000 t/y of decene, plus additional C8 and C12 – but that didnt quite restore the tonnage lost when Pasadena closed. So LAO, and consequently PAO, could be snug for years to come, LubesnGreases heard from more than one marketer.

Hunting for C10

For PAO to expand significantly, one of these sources added, its going to take an expansion of LAO capacity (but theres none on the horizon) or perhaps a new technology for making decene. Thats not so far-fetched, and innovative sources of decene could actually be on the way.

First, theres the possibility that the development of North Americas shale gas reserves could lead to more ethylene crackers being built. Admittedly, the ethylene would still need to be converted to the right LAO monomers for making PAO.

Second, the company Elevance Renewable Sciences, of Bolinbrook, Ill., is creating a biorefinery and derivatives operation in Natchez, Miss. Using a process called olefin metathesis, its output will include decene to make PAO for lubricants, Andy Shafer, Elevance executive vice president of sales and market development, told Lube Report. The Elevance decene will be produced from renewable feedstocks.

And decene could come some day from the bioengineering firm Amyris, which is making C15 olefins from farnesene (a renewable, naturally occurring chemical) and isomerizing them into base oils. Farnesene also could be converted into C10, decene, the company believes.

Jeffrey Brown, Amyris vice president of lubricant products in Emeryville, Calif., said last month that Amyris and its partners will soon market a base oil thats identical to 4, 6 and 8 cSt Group III, but made from sugar sources such as sugar cane, corn syrup or beet syrup. The first commercial batches are due from an Albemarle plant in Orangeburg, S.C., in January.

And after that, well be working with customers to make C10, for a PAO replacement, Brown said. Eventually, he added, well build out around the world, wherever we can get the sugar supply. Wouldnt that be sweet news for decene-hungry PAO producers?

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