A Fast Track to Group III Base Oils 14 June 2011 ICIS Asian Base Oils and Lubricants Conference - Seoul, Republic of Korea Harry Kwon Marketing Manager
Contents 1. Engine Oil Future Trend 2. Base Oil Future Demand 3. SK s Future Expansion Plans 4. Conclusion 1
Engine Oil Requirements Long Drain Interval Fuel Economy Emission Control 2
Engine Oil Requirements Long Drain Interval Fuel Economy Oil + FM Stability High VI Base Oils Engine Protection High Temp Viscosity Maintain Optimum Viscosity Performance Demands Desirable Properties 3
Engine Oil Requirements Fuel Economy Low Volatility Lower SAE Viscosity Lower Friction Engines Low Temp Viscosity Easier startup/warm-up Performance Demands Desirable Properties 4
Engine Oil Requirements Emission Control Low Metal/P/S Lower SAPS Performance Demands Desirable Properties SAPS = Sulfated Ash, Phosphorus and Sulfur 5
Governments Lead Innovation USA Gasoline engine CAFE requirements by 2016 35.5 mile per gallon ( 15.1 km/l). U.S. Government 19 May 2009 Miles per gallon 2011 CAFE 2016 CAFE Cars 27.5 42 Light duty trucks 24 26 Combined Fleet 27.3 35.5 53 % Increase CAFE = Corporate Average Fuel Economy 6
Governments Lead Innovation USA EPA & NHTSA : 25 October 2010 New HD Diesel Vehicles Program Fuel efficient HD diesel engine oils Lower operating viscosities: 5W-40, 5W-30, 0W-30 EPA = Environmental Protection Agency NHTSA = National Highway Traffic Safety Administration 7
Governments Lead Innovation Europe 2012 130g CO 2 /km 2020 95g CO 2 /km 8
New Global Standard ILSAC GF-5 First licensing date : 1 October 2010 Sequence VID : New fuel economy engine test - Aged oil low temperature viscosity limits - Stronger engine protection & stronger protection of emission control systems ILSAC = International Lubricant Standardization and Approval Committee 9
OEM Movement to Lower Viscosity OEM OW-20 5W-20 5W-30 Toyota 1.8L, 2.4L, 2.5L, 2.7L, 4.0L, 4.6L, 4.8L, 5.7L Main Grade 1.5L, 3.5L Ford Cars, Trucks Main Grade 4.0L 5.4L (5W-50) GM, Chevrolet Cars & Trucks Main Grade Honda Civic Hybrid: 1.3L, Insight Main Grade Nissan Altima Hybrid 2.5L Main Grade Hyundai Main Grade Chrysler Main Grade 2.4L turbo (xw-40) 3.5L (10W-30) Source: Motor Information Systems: 2009 and 2010 model years 10
Market Structure Western Europe Value Top Tier Premium market tier 5W-30 lower SAPS engine oils Group III Base Oil Only Mid SAPS OEM C2 Group III 5W-30 5W-40 Low SAPS C4 +OEM C1 Group III 5W-30 HIGH HTHS (>3.5cP) LOW HTHS (<3.5cP) Performance Source: The Lubrizol Corporation, 2010 11
PCMO Demand Change by Viscosity Grade Western Europe Source: The Lubrizol Corporation, 2010 12
HDEO Lube Quality Upgrade China Source: Infineum Trends 2010 High Tier : API CG-4 and above Low Tier : API CF-4 and below 13
PCMO Lube Quality Upgrade China High Tier : API SL and above Low Tier : API SJ and below Source: Infineum Trends 2010 14
Contents 1. Engine Oil Future Trend 2. Base Oil Future Demand 3. SK s Future Expansion Plans 4. Conclusion 15
Global Demand for Base Oil UNIT : KTPA 35,000 Group III Demand 6,000 30,000 25,000 20,000 15,000 10,000 5,000 5,000 4,000 3,000 2,000 1,000 - - 2006 2009 2012 2015 Base Oil Total Global Group III Base Oil 16
Base Oil Demand North America UNIT : KTPA 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Group III Demand 1,100 1,000 900 800 700 600 500 400 2006 2009 2012 2015 Base Oil Total Group III Base Oil 17
Base Oil Demand Western Europe UNIT : KTPA 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - Group III Demand 1,100 1,000 900 800 700 600 500 400 300 200 100 2006 2009 2012 2015 Base Oil Total Group III Base Oil 18
Base Oil Demand Asia Pacific UNIT : KTPA 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Group III Demand 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200-2006 2009 2012 2015 Base Oil Total Group III Base Oil 19
Motor Vehicles/Lubricant Demand China UNIT : MILLION 160.0 Lubricant Demand UNIT : KTPA 12,000 140.0 120.0 100.0 80.0 60.0 40.0 20.0-10,000 8,000 6,000 4,000 2,000-1997 2002 2007 2012 2017 Motor Vehicles in Use Lubricant Demand Source: The Freedonia Group, Inc. 20
Motor Vehicles/Lubricant Demand India UNIT : MILLION 35.0 Lubricant Demand UNIT : KTPA 2,500 30.0 2,000 25.0 20.0 1,500 15.0 1,000 10.0 5.0 500 - - 1997 2002 2007 2012 2017 Motor Vehicles in Use Lubricant Demand Source: The Freedonia Group, Inc. 21
Group III Base Oil Share Increase 2006 2015 5.0% 17.7% 36% 59.0% 45.3% 37.0% Group III Base Oil Group I Base Oil Others Group III Base Oil Group I Base Oil Others 22
Contents 1. Engine Oil Future Trend 2. Base Oil Future Demand 3. SK s Future Expansion Plans 4. Conclusion 23
Current Status & Future Expansion SK is the largest Group III Supplier in the world `14. 1Q `12. 2H Future Capacity = Current Capacity X 2 24
Production Capacity 2,750K MT TO-BE (2014) #5 +650K MT #4 +500K MT + 240K MT 1,360K MT AS-IS (2011) #3 Revamp #2 Revamp #1 Revamp `95 `01 `04 `06 `08 `12.1H `12.2H `14 ~ 25
YUBASE Global Network Amsterdam Seoul Tokyo Ulsan Houston Jakarta Indonesia Plants Branches Terminals Agents/Distributors 26
Contents 1. Base Oil Market Trend 2. Base Oil Future Demand 3. SK s Future Expansion Plans 4. Conclusion 27
Conclusion Long Drain Interval Group III Base Oil Fuel Economy Emission Control 28
Conclusion UNIT : KTPA 35,000 Group III Demand 6,000 30,000 25,000 20,000 15,000 10,000 5,000 5,000 4,000 3,000 2,000 1,000 - - 2006 2009 2012 2015 Base Oil Total Global Group III Base Oil 29
Conclusion The capacity of SK Lubricants will be more than double of current capacity and SK Lubricants will give more stable supply for customers. 30
Thank you for your attention 31