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From Surplus to Special

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Twenty-five years ago, naphthenic base oil refining was a crowded field, jam-packed with bygone names such as Seaview Petroleum, Witco, MacMillan and Lubricating Co. of America. Major multinationals – Exxon, Sun and Shell – dominated the market, and the Western Hemisphere was glutted with low-margin naphthenic barrels. Then came a period of plant closings and industry contraction which turned the tide from plentiful to pinched.

Today the picture is mostly righted, says Burnham, Ill.-based John Banach, lube sales manager for Calumet Specialty Products Partners. Nary a major is in sight, and independents such as Ergon, Calumet and San Joaquin have risen to prominence in the merchant market. From 14 refiners in the Americas in 1986, just eight survive (although theres a smattering of others in Asia and Europe, led by Nynas). Both quality and capacity have risen, and far from being undervalued, naphthenics have the status of specialty oils.

Naphthenic oils are a unique product, for unique applications, declared Banach at last months ICIS Pan American Base Oils & Lubricants Conference. Naphthenics are sold into many applications with strict chemical or physical needs that make substitution with other oils very difficult. In lubricating greases, metalworking fluids and electrical transformer oils, they supply the right solubility, oxidative stability, color, pour point and/or flash point. And recently theyve gained traction in the tire manufacturing industry.

Calumet itself refines naphthenic base oils in Princeton, La., with about 7,000 daily barrels of pale oil capacity. Looking back in his Dec. 1 presentation, Banach noted that the departed majors all had solid standings in naphthenics. Exxon and Shell were big in transformer oils, while Sun was the number one supplier of rubber process oils; about 90 percent of rubber manufacturers had Sun oils formulated into their products. But naphthenics were just a small percentage of their overall business, and one by one they dropped out.

Those who were left faced government regulations and health and safety concerns, when it was found that older, milder refining processes failed to destroy cancer-causing polycyclic aromatic compounds in the oils. The concern focused on vacuum distillation and mild hydrotreating, but if the oil was more severely solvent refined or hydrotreated, that worry went away, said Banach. The choice was stark: Spend millions to upgrade the refineries, or watch sales shrivel as pale oils were labeled as carcinogenic.

Calumet was among those choosing the first course of action. We spent $30 million to invest in a high-pressure hydrotreater, Banach recalled, and we also built a new refinery in the late 1980s. But others folded. The Americas market went from 67,300 barrels per day of capacity in 1984, to just 39,900 b/d a decade later when Shell – the last major standing – took its leave.

That triggered a severe shortage, but customers found that substituting other products for naphthenics was very difficult. Some tried API Group I paraffinic base oils, but these lack the specific chemical properties and excellent solubility that naphthenics provided, he said. The tightness finally eased when expansions at Ergons Vicksburg, Miss., plant lifted the regions total capacity to its current 53,000 b/d.

Ergon is the major player, with greater than 40 percent of the naphthenics base oil available in the Pan American market, Banach said. Of the regions seven other participants, four market their own production (Calumet, San Joaquin, Cross and Petrobras) and three have supply agreements with another seller. Calumet markets the output of Lyondell subsidiary Houston Refining, while Nynas handles that of Rafineria Isla in Netherlands Antilles and Valeros refinery in Three Rivers, Texas.

To serve their farflung customers, naphthenic refiners today operate about 22 terminals spread throughout the Pan American region, plus many use flexiflow terminals and distributors to handle their oils, he said.

Larry Buck, Calumets export manager, then offered some details regarding Latin America. The naphthenics business is seeing growth taking off in the Latin American market, as it has been for the last five years, he said. Were seeing fantastic rates of growth, and lots of oil is being shipped to fill these needs. Other shipments are going to Canada, France and U.K., but their growth is low compared to Latin America. So its a smaller market, but growing.

Most pale oil supplied to South America travels via sea freight, Buck said. Bulk movements go by rail or barge to Houston, then via boat as bulk shipments of 1,000 metric tons or more. There also is trade in ISO tanks and flexibags, which typically hold about 20 metric tons each. Some of it also moves as drums, in various quantities, but this is less favored for the heavier products because you need steam heat to pump them, so those tend to go in flexibags.

Much material goes overland into Mexico, he added. There are very good agents at the border with tanks located in Laredo or Brownsville, Texas. These agents move the product directly into Mexico, and about 80 percent of the oil going into Mexico goes through these agents, who do a very good job.

Banach and Buck also reviewed the six principal viscosity grades of naphthenic oils, and the target markets for each:

The lightest, a 40 vis grade, largely is used in aircraft hydraulic fluids (where Exxon was king, but others have picked up now, said Banach), ink oils, and fuel and lubricant additives.

Most 60 grade goes into electrical transformer oils, said Banach. This grade is seeing healthy demand in Latin America for transformer oils, refrigeration, compressor and hydraulic oils, and shock absorber fluids, added Buck.

Big users of 100 pale oil include metalworking fluids, greases and rubber process oils.

The 500 vis is prized for making adhesives and white oils. Key properties are low odor, good UV stability and ability to meet safety requirements for products that may see human contact.

The 750 grade is a favorite of grease manufacturers, who also recognize that this cut is one-half pound per gallon heavier than the paraffinic type. Grease is sold by the pound, so you can get extra poundage by using the naphthenic, Banach pointed out.

Finally, the heavy 2000 vis grade largely goes to the rubber process industry as a replacement for aromatic extracts, which were banned in Europe for health reasons. This forced tire manufacturers to seek a substitute, and although naphthenics are not a drop-in replacement, they do fit the bill.

Latin Americas lubricants industry likes the 100 vis grade for making metalworking fluids, and the 500 to 750 grades for making grease, said Buck. This market is large, he added, but its a tough market from our point of view to get these oils down to South America and be competitive.

No future plans have been announced to increase naphthenics production in the region, so oversupply is unlikely for now, Buck concluded. Some new naphthenics plants are promised in China, but its too early to tell if Chinese pale oils someday will reach the Americas. I hope itll all stay at home in China, he quipped.

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