Group I replacement in industrial oil formulations: A look at hydraulic fluids

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1 Group I replacement in industrial oil formulations: A look at hydraulic fluids 5 to Encontro Internacional com o Mercado, June 2015 Dr. Luis Bastardo-Zambrano, Nynas AB

2 Lubricant base oil slate development Evolution of the base oil pool Source LNG

3 Naphthenic market: A significant part of the global oil market Global lubricant demand: 39.9 M Tons (1% of the total oil market) Automotive Lubricants Industrial Lubricants Global naphthenic potential: About 10% of total base oil demand (Source Fuchs Petrolub AG presentation at 18th ICIS- LOR World Base Oils conference Feb 2014 in London)

4 The coming 5 years The boost of Group II/III capacity Group III; 8.2 mmtpa (+4.1 mmtpa) Group I? mmtpa Group II; 22.4 mmtpa (+8.6 mmtpa) Lubricant demand (mmtpa) Source for historical data: Fuchs Petrolub

5 The demand outlook will be the result of a balancing act between tailwinds and headwinds Longer lasting lubricants Lower losses in use Smaller sump sizes Increasing vehicle population Increased mechanization Growing industrial production

6 However, the demand growth will not match the supply growth Independently of the way the demand will develop, without closures we are heading towards a period of overcapacity The demand outlook will only determine the size of the oversupply In the most optimistic growth scenario the excess capacity would reach 6 M mt/y In the most realistic growth scenario the excess capacity would be over 10 M mt/y

7 Base oil Market in Europe No closures of Group I refineries in 2014 Europe has 15% of global Base oil capacity Europe has 25 % of global Group I capacity Group I closures announcements Europe for 2015: Company Location Capacity (tpa) Shell Pernis, Netherlands Total Gonfreville, France Colas Dunkerque, France Nynas Hamburg, Germany Group I capacity in South America has remained flat at 1.5 Mtpa since 2011* *LubesNGreases

8 How will this affect the lubricant industry? The Group I production rationalization will push major Group I producers with own lubricant production to focus mainly on production for captive use The product offering will not any longer be optimized on industrial lubricant requirements

9 The majority of Group I producers have an inhouse lubricant business Non lubricant producers, 11% Lubricant producers, 89% 89% of the global base oil production comes from producers that have an in-house lubricant business

10 The collateral damage of the paraffinic quality shift Group II and III paraffinic oils are excellent base stocks for the formulation of modern engine oils However, Group II and III paraffinic oils display lower solvency compared to Group I paraffinic oils Moreover, there is a limitation in the maximum viscosity that can be reached in Group II and III plants Therefore, the shift from Group I to Group II and III paraffinic oils will pose challenges to industrial lubricant formulators, as it will lead to a loss of solvency and viscosity range availability

11 Group I oils are primarily used in industrial applications Global Usage of Group I Oils 2013 (total market approx. 17 million tons) Source: Kline

12 Viscosity gap API group Light neutral Medium neutral Heavy neutral Bright stock Group I 38% 13% 33% 16% Group II 55% 25% 20% none Group III 80% 20% none none The ongoing shift in capacity will generate availability issues for heavy neutrals and for bright stocks

13 Base oils: Chemical composition Paraffinic and One-ring Naphthenic Multi-ring naphthenic Aromatic SIMILAR CHARACTERISTICS PAO GROUP II Group I replacement (NB) GROUP I NAPHTHENIC 0 % 20% 40% 60% 80% 100%

14 A naphthenic based Group I replacement Can be widely applied in industrial lubricant formulations Main advantages Most similar product to Group I oils High degree of flexibility in blending Optional tailor-made blends readily available Superior low temperature performance Main challenges vs Group I base oils Slightly higher volatility Lower flash point Slightly lower VI

15 The Naphthenic based (NB) Group I replacement vs. SN reference base oils NB 70 SN 70 NB 100 SN 100 NB 150 SN 150 NB 300 SN 300 NB 500 SN 500 NB 600 SN 600 Density (kg/m 3 ) FP COC ( C) PP ( C) C (cst) C (cst) VI Aniline Pt. ( C ) Sulfur (m %) C A,% C N, % C P, % Refractive index

16 An example of reformulation: Hydraulic fluid The formulation HM 46 - an industrial hydraulic fluid based on: NB base oil (99%) Additive package (anti-oxidant, antiwear, rust & corrosion inhibitor, antifoam) Pour point depressant M 46 a commercial product HM M ºC ºC VI Density 15 ºC) Flash point (COC, ºC) Pour Point (ºC) Nz (mg KOH/g) Water (ppm) 20 11

17 Physical Properties HM 46 (NB) vs ISO Test Unit HM 46 ISO , HM Method Filterability I/II* 97/94 80/60 ISO Foam 24 ºC ml/ml 10/0 150/0 ISO 6247:1998 Foam 93 ºC ml/ml 30/0 80/0 ISO 6247:1998 Foam 24 ºC ml/ml 10/0 150/0 ISO 6247:1998 Air Release min 2 10 ISO 9120 Demulsibility min ISO 6614 Oil/water/emuls. ml 40/40/0 40/37/3 ISO 6614 TOST (1000 h) mg KOH/g - a 2 ISO RPVOT min a ASTM D method A *= Dry (no added water), Applied Pressure 100 kpa a = SS :2015, Swedish Standard for Hydraulic Fluids, Level A, equal to 1000 h TOST

18 Miscibility Study HM 46 vs. M 46 A miscibility study is undertaken to determine the physical properties of blends of two candidate fluids any detrimental effects? HM 46 (NB) and M 46 (Commercial) were studied Three blends were prepared (vol:vol) 90:10 50:50 10:90 The following physical properties were determined: Filterability Foaming Air release Demulsibility (Emulsion stability)

19 Miscibility study HM 46 (NB) vs. M 46 (Commercial) Test Unit Method ISO , HM 90:10 50:50 10:90 Filterability (I)* ISO Filterability (II)* ISO Foam 24 ºC ml/ml ASTM D /0 10/0 10/0 10/0 Foam 93 ºC ml/ml ASTM D /0 20/0 20/0 30/0 Foam 24 ºC ml/ml ASTM D /0 20/0 30/0 30/0 Air Release min ASTM D Demulsibility min ASTM D Oil/water/emuls. ml ASTM D /37/3 40/40/0 40/37/3 40/38/2 *= Dry (no added water), Applied Pressure 100 kpa

20 Seal compatibility The extent of each migration depends on the type of oil, elastomer and plasticizer If the base oil diffuses very little into the elastomer shrinkage and hardening Base oil or lubricant If the oil diffuses extensively excessive swelling Both shrinkage and excessive swelling are undesired as they compromise the stability of the sealing boot. Mineral oil Plasticiser Rubber The oil s solvency (aniline point) is a relevant parameter in the compatibility with the seal s elastomer

21 Seal compatibility: The tests Seal samples were totally immersed into the oil and aged at 100 C for 168 hours Changes in hardness and weight in the rubber were measured The hardness was determined by the IRHD (International Rubber Hardness Degrees) method, where the rubber s resistance to indentation is measured by pressing a rounded steel peak connected to a calibrated spring towards the material.

22 Seal compatibility HM 46 vs. M 46 Weight change (%) Material HM 46 M 46 NBR 28% AN (Peroxide cured) NBR 28%AN (Sulfur cured) HNBR1 35% AN (Peroxide cured) Hardness change (%) Material HM 46 M 46 NBR 28% AN (Peroxide cured) NBR 28%AN (Sulfur cured) HNBR1 35% AN (Peroxide cured) ISO , acceptable increase in volume is 0-12%

23 Conclusions of the Formulation & Miscibility study The novel Hydraulic Fluid HM 46 (NB) displays the desired and expected properties The Oxidation stability result in the harsh RPVOT compares well versus e.g. demanding technical standards, and vs. Gr I based Turbine oils They benchmark well vs. a common industry leading formulation, called M 46 The tested hydraulic fluids in the miscibility study were compatible: HM 46 versus M 46 No significant differences of the physical properties could be experimentally determined, i.e. no detrimental effects from the blending of different fluids It is therefore likely that the naphthenic based hydraulic fluids, would be compatible with similar systems in the field

24 Summary The base oil industry has been going through important changes in the last few years Group II and III base oil production has grown at the expense of Group I production The rationalization of Group I production will result in a solvency and viscosity gap in the market Naphthenic oils can fill part of that gap

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