As a true veteran of the industry, I have been involved since the early days of API Group II and was around when new Group I base stocks were still appearing on the market. Today, some also treat base stocks as a pure commodity, and tools like base oil interchange and viscosity grade read-across reinforce that perception. Advisory Committee. Yet work has already begun on the next specification!
Procurement colleagues want to believe that base stocks are alike and that they can always be sourced at the lowest price, especially when supply exceeds demand. But all base stocks are not created equal. Differences exist regarding technical attributes, the size of the plant producing them, as well as their location and associated supply chain.
The feedstocks used to produce base stocks also matter. Whether or not a base stock can be called synthetic has also been widely discussed, but that is not critical here.
I remember when the primary options for Group II came from Chevron, Petro-Canada Lubricants and Sunoco. Today, we have dozens of Group II producers around the world.
When Group II was introduced, Group III barely existed, and Group I differences could be massive regarding performance. By the early 2000s, there were a few Group IIIs, and today that market has grown significantly. We now see many new Group IIIs, including rerefined base stocks and those from non-conventional sources such as GTL, CTL and even plant oil.
It’s a complicated and ever-changing world, and of course we have seen many Group I plants shut down because they don’t satisfy most technical needs for today’s lubricants.
Base oils are the heart and soul of lubricants. Advances have enabled the latest low-viscosity technologies and are largely responsible for the long oil drain intervals that are common today. Without the right base stocks, SAE 0W-XX oils would not have been possible, along with some fill-for-life (or warranty-life) applications such as transmission fluids. If you talk to any formulator, they know what makes a great base stock, and so should a procurement manager if they want to meet all the needs for their companies’ approved products.
Charles Baker, formerly of ExxonMobil, who spent his career designing and building base stock plants, commented: “Base stock has made huge advances since the 1980s. It has allowed significantly lower viscosity, which has brought very significant improvements in fuel economy and lowered emissions. VI and volatility play an important role in expanding the formulation box, so higher VI is best. Oxidative stability has also improved, allowing lubricants to last much longer compared to the past.”
One can easily compare simple technical differences. Group I stocks differed in many ways, including manufacturing process, feedstock source and especially saturates and sulfur content. Saturates could range from the 50s to just under 90, with sulfur levels much higher than those seen in today’s advanced base stocks. This made enormous differences to lubricant formulation and the additive packages needed for even basic approvals.
Baker added: “Hydrocracking and, more recently, catalytic wax conversion were game changers and huge advancements in base stock production. They brought consistency and enabled lower viscosity due to improvements in viscosity index, which allowed lower volatility at lower viscosity. They also improved consistency, with a tighter range for saturates of 90-100 and sulfur levels below 300 ppm.”
Additional Group II capacity allowed OEMs to move to 5W-30 in the 1990s and, for the history buffs, SAE 10W-30 was still the number-one-selling viscosity grade at the turn of the century. It must be noted that Group II stocks are also not created equal, and there can be significant formulation differences, from, say, a Group II 100N with a VI of 98 and a Noack volatility of around 20 to a 117 VI 100N with volatility closer to 15. The latter is often referred to as Group II plus. Many Group IIs are available, but North America remains the largest producer.
Today, we also have many Group IIIs to choose from. The one thing that is consistent with Group III is that sulfur levels are below 300 parts per million and mostly close to zero. Saturate levels usually approach 98% or more, but consistency stops with VI, where the VI can start at or near 120 and have no upper limit. Capability and formulation flexibility are greatly enhanced as VI goes up, and commercial options cover the gamut, with the highest exceeding 135. Some think of Group IIIs as 120-130 and over 130, but it’s a continuum, and the higher the better, with over 130 often defined as Group III plus.
For completeness, we also have Group IV polyalphaolefins and Group V base stocks. Polyalphaolefins do not contain ring structures, double bonds, sulfur, nitrogen components or waxy hydrocarbons, which are seen in conventional Group I, II and III base stocks. They have superior low-temperature properties, and their characteristics allow formulators to develop very high-end lubricants.
PAO was once the gold standard for top-tier engine oils, but Group III has caught up and is usually less expensive to formulate with. PAO, however, remains the gold standard for low-temperature operating environments. Formulation is also complex due to solubility concerns and very limited base oil interchange from conventional Group I, II or III base stock. Group V is a catch-all category for everything else and brings immense cost and even more complexity to engine oils, making its use in engine oils extremely limited.
Moving from the technical attributes, let us consider non-technical areas that stakeholders must evaluate. Scale and investability are key factors for any base stock but are especially important for Group III and complex approvals. Some approvals, such as basic ILSAC approvals for gasoline engines, are relatively easy and can be completed quickly using base oil interchange or the single technology matrix option for general market products. They can require relatively small investments and be completed in just a few months. This covers most conventional oils without special approvals, such as GM dexos1 in North America or the many top-tier European approvals seen today.
Top-tier approvals, from GM dexos1 to advanced VW specifications, can take at least a year to obtain and in some instances approach three years or longer to complete testing and gain approvals. Investments can range from as little as U.S.$500,000 for one product in one viscosity grade to several million dollars for more complex approvals requiring multiple viscosity grades and multiple base stocks. Field testing can also add considerable time and cost to approvals. OEMs typically do not allow base oil interchange or viscosity grade read across or only allow them on a limited basis.
There is limited testing hardware and skilled resources necessary to execute programs and work with OEMs on formal approvals. While some approvals can be accomplished quickly after testing is complete, others can take nine months to a year or longer once OEMs complete their reviews. All of this comes with risk. If issues arise along the way, it could force work to restart entirely in a worst-case scenario or even be abandoned because of technical or commercial challenges.
Jeff Hsu, now a lubricants and fuels consultant and formerly a technology manager for lubricant development for Pennzoil and Quaker State motor oils at Shell, indicated: “For many lubricants there is little or no formulation flexibility. Dexos1 and most top-tier OEM-approved products offer no flexibility concerning the final formulation, as they are confirmed in many engine platforms using the final formulations, and this is especially critical when supplying factory-fill oils for engines and transmissions.”
Hsu added that most OEMs “typically have additional internal validation tests, and final performance may be tied to specific base oils and their performance. OEMs may not allow substitution of an alternative base stock in the event of a supply chain disruption without further validation.”
Additive suppliers making these investment decisions must consider the related business case, which often involves potential collaborations with marketers and base stock suppliers. This includes cost and risk sharing concerning timing and the successful completion of the approval process. Returns on these investments depend on selling additives with appropriate margins and securing enough business to ensure a solid return. These products are costly and initially have limited demand. This is where scale and base stock capability become so important when deciding where to invest. If you produce low volumes of base stock, it is much harder to justify investment because the limited capacity restricts how much additive can ultimately be sold.
As noted earlier, not all Group III stocks are alike, and the VI of the base stock plays a significant role in enabling a lubricant to meet some of the toughest specifications, especially regarding the latest low-viscosity, low-Noack formulations whose demand is rapidly growing. Low-VI Group IIIs closer to 120 are not sufficient for the highest-performing products, especially SAE 0W-XX products for gasoline engines. Some high-VI Group III may be needed even for the most basic ILSAC 0W-20. Dexos1 and top-tier European OEM products require significant amounts of high-VI Group III, commonly known as Group III plus. Typically, Group III plus refers to VI levels above 130, but even a 127 VI Group III can make a meaningful difference compared to a 123 VI product. Producers with products above 130 VI have a technical advantage regarding successful completion of some of the industry’s most demanding specifications.
A base stock supplier with large and multiple manufacturing plants around the world also has an advantage. The scale of global supply capacity creates a stronger business case because these suppliers can serve many customers who then buy additives and help ensure investment returns.
“The use of SK Enmove Group III and Group III Plus offers the widest number of approvals for top-tier lubricants in the general market and is used by most marketers for at least some products,” Hsu said. OEMs are still reluctant to rely on only one solution in case of supply disruption and prefer to maintain options regarding base stock supply and available marketers who blend the final oils.”
The other end of the spectrum is a supplier with one plant, no Group III Plus or very little capacity. Rerefined Group III would fall into this category, along with many Group III producers that manufacture limited volumes of mostly low-VI Group III. The business case for approving these stocks must be more creative to secure the required investments and formal approvals. Every new Group III entrant needs to consider this, decide which approvals are necessary to ensure adequate sales and develop a value proposition that competes on more than price alone.
Supply security is also of the utmost importance, so having only one approved base stock is not an ideal scenario. Group III and Group III plus are global markets, with limited supply in Europe and North America, where demand is highest, extending supply chains. We have also seen the impact of having Group III and Group III plus supply concentrated in one region of the world and then losing that supply for a prolonged period. If possible, additive companies also want to provide customers with choices by enabling the use of more than one base stock — easier said than done.
Steve Haffner is president of SGH Consulting LLC. He has over 40 years of experience in the chemical industry, primarily with Exxon Chemicals Paramins and Infineum USA. Contact him at sghaffn2015@gmail.com or 908-672-8012.