ONICO EXECUTIVE SUMMARY

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1 ONICO ul. Flory 3/ Warszawa, Poland 888 Prospect Ave La Jolla, California Poland US Please find attached a presentation titled "Stored Diesel Fuel Quality and Principles of Particle Counting" prepared by a global leading authority in the field - Southwest Research Institute (SwRI), please find more information on EXECUTIVE SUMMARY Gary Bessee, SwRI Director and Steve Westbrook, Institute Scientist, the authors of this presentations, have a combined 73 years experience in Fuels and Lubricants Research at SwRI. ONICO, a Polish importer and distributor of petroleum products has engaged SwRI to prepare this report and to test the ONICO solution to the global issues around stored diesel fuel. The SwRI report first addresses fuel quality and contaminates. Possible points of contamination are: end users storage tanks, the crude source, the refining process, the pipeline, the terminal, and delivery trucks. The SwRI document notes that ASTM D975, the most commonly used specification for diesel fuel in the U.S. includes requirements for fuel that is typically expected to be used within about six months. Proper monitoring of fuel contamination and remediation can potentially extend the "shelf life" of stored fuel well past the six months. Thus, saving money and the environment at the same time. Possible Issues with stored diesel fuel include: accumulation of water and particulates during storage; growth of microbial contaminants; oxidation of fuel; and precipitation of wax during cold weather. Plugged filters/screens/lines are the most common causes of fuel-related problems and these issues can all contribute to plugging.

2 Water is the most common fuel system contaminant. It can come from: transportation, delivery and intermediate storage; tank breathing; dissolution of dissolved water/ rain through fill pipes and other openings; ground water through leaks in underground tanks. Water: increases corrosion and wear; freezes during low temperature operation; carries dissolved acids. Water is necessary for microbiological growth. There are additional discussions of biodiesel production and storage temperature concerns. The report states that the US Federal Trade Commission allows diesel fuel to contain up to 5% (B5) biodiesel in ASTM D975 diesel fuel and ASTM D396 heating oil without special labeling. The SwRI presentation also includes illustrations of clouded fuel and plugged filters. Low temperature operability and summer fuel vs. winter fuel are discussed. Additives to improve low temperature operability are illustrated and discussed. There are also discussions, along with pictures, of fuel degradation, microbial growth and contamination, and fungus contamination. The presentation notes that "the presence of water, microbial growth, alcohols, and acidic contaminants can all lead to corrosion of metals in the fuel tank. The SwRI Report provides recommendations for gen-set operator that should minimize risks: Work with your fuel supplier to obtain fuel that is appropriate to your application Monitor the fuel during storage to detect contaminants before they become a problem Prudent use of additives - many additives provide inadequate or even no protection Provide means to remove contaminants from stored fuel if they are detected, i.e. fuel filtration or polishing

3 The SwRI presentation then describes the workings of an Automatic Particle Counter (APC) and how is detects contaminant particles which may be in the stored diesel fuel. The APC will detect but no differentiate: dirt, free water, air, and fuel degradation products. The APC will not detect dissolved materials such as fuel additives or dissolved water. Therefore, once a threshold of countable particles are detected, indicating diesel Fuel possible contamination, further lab testing is required to analyze an actual fuel sample in order to suggest proper remediation to bring the stored fuel into industry acceptable specifications. SwRI tested a Parker Automatic Particle Counter. The Parker APC will perform daily testing and will report results via IBM's IoT to an operation center, which will provide "real time" notification to storage tank operators of potential contaminate particulate levels. The data will also be reported to IBM Watson for in depth analytics. Excessive levels of particulates may justify remediation in order to bring the cleanliness level below the desired level to ensure proper performance. IBM Watson will also provide insight into trends of contamination levels for each unique storage tank as well as industry wide analysis of the numerous factors that might be contributing to diesel fuel contamination.

4 Fuel Quality and Principles of Particle Counting Gary Bessee, Director Steve Westbrook, Institute Scientist 1

5 Outline Introduction the Southwest Research Institute (SwRI) Resumes for Gary Bessee and Steve Westbrook Fuel Quality Storage Stability Thermal Stability Typical contaminants Possible remediation for contaminants Particle Counting Principles of Light Blockage ISO 4406 Cleanliness code Questions 2

6 Southwest Research Institute (SwRI) Founded in 1947 Non-profit Revenue from contracts Applied RDT&E services Physical sciences & engineering Broad technological base Capital intensive operation 3

7 SwRI 4

8 Bridging the Gap Universities, National Labs Southwest Research Institute Industry Bridging the Valley of Death Fundamental Science Basic Research Applied Research Product Development Production 5

9 Divisions at SwRI Applied Physics Applied Power Chemistry and Chemical Engineering Defense and Intelligence Solutions Powertrain Engineering Fuels and Lubricants Research Intelligent Systems Mechanical Engineering Space Science and Engineering 6

10 Gary s Resume 35+ years at SwRI working in filtration, fuel cleanliness, and wear studies Most work involves cleanliness of hydraulic fluid, lubricant oils, and diesel and aviation fuels. Member of SAE Filter Test Methods Committee for 26 years US delegate for 20 years for fuel water separation and multipass filtration testing Member of ASTM and attend other various technical societies CRC, AFC, IASH, etc. Co-author of filtration chapter in ASTM Automotive Lubricants and Testing and multi SAE and other technical papers Hosted 10 International Filtration conferences 7

11 Steve s Resume Mr. Westbrook has 38+ years experience in standardized and non-standardized testing of petroleum fuels and lubricants. He has extensive experience in distillate fuel quality, fuel stability testing, laboratory test development, technical liaison in fuel-related field problems, and development of field-tests for diesel fuel stability and cleanliness. He has conducted research on fuel stability additives, diesel fuel-degradation reaction mechanisms, and the effects of fuel container surfaces on fuel quality. He also has extensive experience with fuels from alternative sources, especially fuels for diesel engine applications. Mr. Westbrook has authored numerous publications on fuel cleanliness, fuel stability and the long-term storage of fuel. He conducted studies of the application of advanced analytical methodologies for in-the-field analysis of fuels; specifically, on the use of near-infrared spectroscopy for estimation of fuel properties and the use of portable test devices for fuels analysis. He has extensive experience in the study of biodiesel, biodiesel oxidation, and oxidation test methods. Recent work has involved characterization of liquid fuels as it pertains to fuel properties. PROFESSIONAL CHRONOLOGY: Guadalupe-Blanco River Authority: laboratory analyst, 1978; Southwest Research Institute: 1979-[research scientist, ; senior research scientist, ; group leader, ; principal scientist, ; manager, ; principal scientist, ; staff scientist, ; institute scientist, 2015-present]. MEMBERSHIPS: ASTM International; International Association for Stability, Handling, and Use of Liquid Fuels. A Fellow of ASTM International. Current chairman of ASTM Subcommittee D02.E on Burner, Diesel, Marine and Non-Aviation Gas Turbine Fuels. Member of the ASTM Committee on Technical Committee Operations. Past chairman of the International Association for Stability, Handling, and Use of Liquid Fuels; and, currently on the Board of Directors. Past chairman of ASTM Section D02.E.05 on Fuel Stability and Cleanliness, Section D02.09.A on Oxidation of Motor and Aviation Gasolines, and Section D02.09.B on Oxidation of Middle Distillate Fuels. 8

12 Fuel Quality and Contaminants 9

13 Fuel Quality and Contaminants Topics for Discussion Possible issues with stored diesel fuel Impact of biodiesel in stored fuel What leads to contaminated fuel in storage Summer fuel vs. winter fuel Corrosion Ways to minimize the risk of contamination 10

14 The Fuel System Each Segment is Another Possible Point of Contamination End User s Storage Tanks Vehicle Fuel Tank and Engine The Fuel System Also Includes: Crude Source Refinery and Refining Processes Pipeline Terminal Delivery Trucks

15 Diesel Fuel in Storage ASTM D975, Table 1, is the specification most commonly used for diesel fuel in the U.S. The specification includes requirements for fuel that is typically expected to be used within about 6 months. Most diesel fuel is not manufactured with the expectation that it will be put in long-term storage and be ready to provide trouble-free use under emergency generator situations. As a general rule, the properties included in D975 will not significantly change during long-term storage of the fuel. Properties not included in D975, Table 1, are more often than not, the most potentially problematic when it comes to trouble-free use of the fuel 12

16 Factors Affecting Fuel Cleanliness And Product Stability Composition And Refinement Product Contamination (Blending Of Pipeline Interfaces) Use Of Non-dedicated Transportation/distribution Systems Inadequate Housekeeping Procedures Ground Water Leakage Storage Environment Equipment Design (Fuel Recirculation Rate, Fuel Tank Construction) Consumption/turn-over Rate Absence Of F/S Equipment Use Of Proprietary Additives Microbiological Growth Ambient Temperature

17 Possible Issues with Stored Diesel Fuel Accumulation of water and particulates during storage Growth of microbial contaminants Oxidation of fuel to form particulates and acidic species Corrosion Precipitation of wax during cold weather Plugged fuel filters/screens/lines are the most common cause of fuel-related problems; and, the above issues can all contribute to plugging 14

18 Water The Most Common Fuel System Contaminant is Water It Can Come From: Transportation, Delivery And Intermediate Storage Tank Breathing Dissolution Of Dissolved Water Rain: Through Fill Pipes And Other Openings Ground Water: Through Leaks In Underground Tanks

19 Water Increases Corrosion And Wear Freezes During Low Temperature Operation Carries Dissolved Acids Water Is Necessary For Microbiological Growth

20 Biodiesel ASTM D 6751, Standard Specification for Biodiesel Fuel Blend Stock (B100) for Middle Distillate Fuels: biodiesel, n a fuel comprised of mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats, designated B100.

21 Experiences in Use In General, When There Have Been Biodiesel-Related Problems in the Field, They Have Been the Result of: Off Specification / Poor Quality Control Low Temperature Operation Look for the BQ-9000 Label in Order to Reduce the Chance of Off-Spec Fuel

22 Biodiesel Is Not: Coal Slurries Raw Vegetable Oils and Fats Non-Esterified Oils Hydro-treated Oils and Fats Blends With Diesel

23 The Influence of the Biodiesel Feedstock Different Feedstocks Result in Different Biodiesel Chemical Compositions and Properties The User Should Be Concerned with the Properties of the Finished Biodiesel Blend Rather Than the Specific Feedstock Example: Tallow Has Better Thermal/Oxidative Stability Than Soy But Poorer Low-Temperature Operability

24 Most Important Properties of B100 (The Properties Most Subject to Change Because of Feedstock and Processing) Oxidation Stability Free & Total Glycerine Flash Point Cloud Point and Soon the Cold Soak Filtration Acid Number Ca, Mg, Na, & K Controlled by Rancimat US: > 3hr ; EU > 6 hr These are contaminants from the production process. Most importantly controls the amount of methanol left from production process Control Low Temperature Characteristics Indicator of Production Quality and Oxidation Contaminants from the Production Process In general, the remaining properties in D6751 are consistent regardless of feedstock.

25 Biodiesel Production The most important aspects of biodiesel production to ensure trouble free operation in diesel engines are: Complete Reaction Removal of Glycerin Removal of Catalyst Removal of Alcohol Absence of Free Fatty Acids

26 B5 Specification Up To B5 Is Allowed in D975 Diesel Fuel and D396 Heating Oil No Changes to Properties in Table 1 of D975 and D396 B100 Must Meet D6751 Prior to Blending

27 B100 With 32 F Cloud Point After Several Days at 40 F The precipitate is a combination of monoglycerides, soaps, and sterolglucosides. B100 was on-spec.

28 Plugged Filters (B5 to B10) Monoglycerides recovered from a plugged fuel filter. Vehicle operated in the upper Midwest. The B100 was on-spec.

29 Fuel Stability Testing Variables Temperature Oxygen Contaminants H 2 O Catalysts Container Type Configuration 26

30 Low Temperature Operability Summer Fuel vs. Winter Fuel Throughout the U.S. fuel suppliers work to deliver fuel for use in winter months that will provide trouble-free use But fuel purchased in the summer is not necessarily expected to provide trouble-free use if used during cold weather months As such, emergency generator owners/operators must be cognizant of the low-temperature properties of the fuel in their system and must assume that the fuel will be needed during the coldest time of the year Testing and monitoring the low-temperature properties is the best method to reduce the potential for low-temperature operability problems 27

31 Low Temperature Operability Nomenclature These are some of the more commonly used terms MDFI Middle Distillate Flow Improvers (Additives) CFI Cold Flow Improvers WCM Wax Crystal Modifiers WASA Wax Anti-Settling Additives WAFI Wax Anti-Settling Flow Improvers DFFI Diesel Fuel Flow Improvers CPD Cloud Point Depressants PPD Pour Point Depressants EVA Ethylene-co-Vinyl Acetate Polymers CFPP Cold Filter Plugging Point (ASTM D6371) LTFT Low Temperature Flow Test (ASTM D4539) PP Pour Point (ASTM D97) CP Cloud Point (ASTM D2500)

32 Additives to Improve Low Temperature Operability Without additives, the wax crystals are large and can easily plug filters This figure used with permission of Infineum

33 Additives to Improve Low Temperature Operability With additives, the crystals remain smaller in size and often pass through the filter. This figure used with permission of Infineum

34 Fuel With and Without Low Temperature Additives Low-Temperature flow improver additives can provide some protection against filters plugged by wax crystals However, the wax crystals still precipitate at the cloud point temperature, they just remain a smaller size These smaller crystals can still precipitate and form a layer of the fuel that is rich in wax That wax-rich layer can still cause plugged filters and lines This is especially true for fuel in storage 31

35 Fuel Degradation Products Can Plug Filters Notice that the particles, formed by the oxidation of fuel, are generally about 1 micron in diameter. The 1-micron particles are usually agglomerated into larger clusters.

36 Microbial Contamination Sulfate Reducers Produce Toxic Hydrogen Sulfide And Elemental Sulfur; And Promote Pitting Corrosion Of Metal Tanks Contribute To Sludge Buildup Plug Filters And Screens Increase Particulates And Fuel Turbidity Metabolites Can Promote Corrosion And Fuel Emulsification (Local ph Can Reach 3 With Fungus).

37 Fungus Contaminated Fuel Plugged Fuel Tank Screen Fungal Colonies

38 Microbial Growth Scanning Electron Micrograph of Fungus Growth Is at Fuel / Water Interface Interwoven Mat Structure Makes This an Effective Filter Plugging Contaminant

39 Corrosion The presence of water, microbial growth, alcohols, and acidic contaminants can all lead to corrosion of metals in the fuel tank Sep SwRI 28, Workshop

40 How to Minimize the Risks Work with your fuel supplier to obtain fuel that is appropriate to your application Monitor the fuel during storage to detect contaminants before they become a problem Judicious use of additives many additives provide inadequate or even no protection Provide means to remove contaminants from stored fuel if they are detected 37

41 Principles of Particle Counters 38

42 Light Blockage Detector Flow Particles Laser 39

43 Light Blockage Particle casts a shadow Detector determines the area of the particle Calculates an equivalent spherical particle 40

44 Principles of Particle Counting Measurement is in 2-D Orientation Statistics More counts the better To a limit Coincidence error More particles than the sensor can measure 41

45 What Is Coincidence Error? ALL particle counters have a coincidence error level Older counters were in the 25,000 particle range Newer counters claim 125,000 particles Two or more particles are counted as one particle 42

46 What A Particle Counter Can and Cannot Measure? The particle counter will detect any contaminant that casts a shadow Dirt Free Water Air Fuel degradation products Cannot identify what they are!!! Cannot detect dissolved materials Fuel additives Dissolved water 43

47 ISO 4406 Cleanliness Code ISO 4406 is an industry standard for measuring the cleanliness of a fluid Provides a code for a range Typically reported for 4-, 6-, and 14 micron particles Parker unit adds the 30-micron size Most likely free water contamination Each ISO is a doubling of the number of particles ISO code 10 is 5 to 10 particles ISO code 11 is 10 to 20 particles Example ISO 18/15/13/10 ISO to 2500, 4-micron particles ISO to 320, 6-micron particles ISO to 80, 14-micron particles ISO 10 5 to 10, 30-micron particles 44

48 ISO

49 Calibration and reporting Particle counters are calibrated using NIST calibration fluid Best to have Parker of the manufacturer calibrate the sensors annually Currently, most results are report in µm (c). (c) currently is the default calibration µm (b) calibration fluid is currently being used Results converted to match µm (c). For the users in the field, this has NO importance. For someone trying to interpret the results, make sure all results are reported as µm (c). 46

50 Trend Analysis Using Particle Counters Obtaining data over a period of time can provide trends in the cleanliness of the stored fuel As fuel breathes, dirt and moisture will enter the fuel storage facility If a filtration system is incorporated into the flow loop. The operator can determine when the fuel is getting outside the desired cleanliness level and filter the fuel until it is below the desired level. Slide 19 illustrates a sample data set illustrating the fuel starting our clean, getting contaminated, and cleaning up several times over the recorded period of time 47

51 Trend Analysis Using Particle Counters Trend Analysis Contaminated Fuel ISO 4406 Code Time

52 Parker Data Parker system that was evaluated at SwRI is show to the right Able to turn on and off when needed to determine the cleanliness of the fuel Output is ISO 4406 Cleanliness Code Parker data (Slide 21) illustrates similar trends as shown in Slide 19 Parker Specs ER/menuitem.de7b26ee6a659c147cf ad1ca/?vgnextoid=fcc9b5bbec VgnVCM a71dacRCRD&vg nextfmt=en&vgnextdiv=687502&vgnext catid= &vgnextcat=icount%2 0PARTICLE%20DETECTOR 49

53 Parker Data Marginal Fuel Contaminated Fuel 50

54 Parker Particle Counter Installation The Parker unit is already enclosed in a sealed compartment. Connect inlet preferably on the pressure (downstream) of the system pump per Parker Operating Manual The return sample from the particle counter can go to slop for disposal or easier to have it return to the storage tank to reduce waste Minimize the sampling lines to as short as possible Communication to IoT and Watson to be performed by IBM 51

55 Maintenance and Daily Operations Keep fluid in the particle counter at all times If the lenses in the counter get dried, it will leave spots that will show up as particles Although the counter is enclosed, if it is best to locate under a cover or protected from the elements When in operation, verify fuel is flowing through the sensor If no flow, check FAQ in Parker Operating manual Heavy contamination may plug the small orifice in the counter Discount the counter and back flush with and solvent, fuel or air to remove blockage. DO NOT use wire as it was scratch the lens Annual calibration or verification can be performed by Parker 52

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