Download - Lubes & Greases April 2013
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playbook
Last call forDex/Merc?
A P R I L 2 0 1 3 V O L . 1 9 I S S U E 4
HCC rewritesthe rerefining
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3LUBESNGREASES
LUBESNGREASESThe Magazine of Industry in MotionLNG Publishing Company, Inc.6105-G Arlington Blvd.Falls Church, VA 22044 USAPhone: (703) 536-0800Fax: (703) 536-0803Website: www.LNGpublishing.comE-mail: [email protected]
Nancy J. DeMarco Publisher Lisa Tocci Managing EditorRichard Beercheck Senior EditorGreg Whitlow Art DirectorSheryl Unangst Circulation ManagerRobert Green Circulation Assistant ManagerLaura Hughes Production Assistant
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(800) [email protected]
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LubesnGreases (ISSN1080-9449), an independenttrade magazine, is published monthly by LNGPublishing Company, Inc., 6105-G Arlington Blvd.,Falls Church, VA 22044 USA. Copyright 2013, LNG Publishing Company, Inc. Printed in USA.
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ExcellenceAwardGold Winner
We extend our thanks to the anonymousreaders who participated in this and previ-ous Readex surveys.
A long with rating ads, the surveyrespondents answered sev-eral quick questions about read-ing LubesnGreases, and theirreplies are impressive:74 percent read half or more of
each issue.83 percent spend a half-hour or
longer with each issue.65 percent save each issue for
reference.87 percent have taken action
on reading articles or columns.61 percent have acted on ads!
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PUBLISHERS LETTER
Congratulations toLiqui-Box, AftonChemical andHeritage-Crystal Clean!Twice a year we engage
Readex, an independentresearch company, to sur-vey LubesnGreases read-ers about how attention-getting, how believable and how informa-tive each ad in the selected issue is. Ivejust received the results from Januaryssurvey. Liqui-Box is undisputed champion,
scoring highest as most believable andmost informative, and also scoring highestoverall. Afton Chemical takes the prize for
most attention-getting. Heritage-Crystal Clean was right behind
Liqui-Box in combined scores and was avery close second in two categories.Kudos go to the marketing communica-
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And the Winners Are ...
Lisa Tocci, Nancy DeMarco & Gloria Steinberg Briskin
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4 APRIL 2013
TABLE OF CONTENTSF E AT U R E S :
14 After the Surge, the Slump. For U.S. base oil sellers,first-half 2012 was the stuff dreams are made on. Thesecond half, a sleepless night.
26 They Wrote the Rerefining Playbook. There were norookies on the management team that built Heritage-Crystal Cleans API Group II rerefinery. They had alldone this before.
34 Naval Ship Puts Accuracy to the Test. The U.S. sealiftship Watson needed to monitor its lubricants to detectand prevent failures in mission-critical equipment.Could hand-helds help?
40 Question Complexity. Our industry has finiteresources, so lets use them to add value notneedless complexity such as redundant engine tests,urges Trevor Russell of Infineum.
46 China: Too Hot for Japans Lubes? The political sparksbetween the two nations have many investors onedge, but some Japanese lubricant firms still hope tofind a warm welcome in China.
54 The Mythical Multi-vehicle ATF. Lets face it: Todaysmarket requires at least six automatic transmissionfluids. Aftons Brad Onofrio slays the old Dex/Mercmyths (and the ones about top-treats).
Page 34
Page 46
Page 54
A P R I L 2 0 1 3 V O L . 1 9 I S S U E 4
D E PA R TM EN T S :
3 Publishers Letter6 Automotive24 Need to Know62 Product News67 Classified
68 PlacesnFaces74 Advertiser Index76 Base Oil Report78 Your Business
On the cover: Heritage-Crystal Cleans rerefinery in Indianapolis
-
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-
a download on the API
website.
Even with this update in
place, APIs Lubricants
Group is already hard at
work to modify one of the
most important pieces of
the document, the six
pages that make up Annex
C. Thats the section on
how to develop a new
automotive engine oil cate-
gory, in this case for gaso-
line-fueled cars and light
trucks. The API Lubricants
group has been working on
the new process and is
getting close to a final rec-
ommendation.
API 1509 was originally
developed to address the
concerns of automakers
that vehicle owners could-
nt be sure that they were
getting the engine oil per-
formance level that
was required for
their car or light
truck. In particular,
there was no
simple way to
identify engine
oils that gave sat-
isfactory fuel econ-
omy benefits for the
latest-model vehicles,
although API had used its
APRIL 2013
Can We Upgrade the Systemfor Oil Upgrades?
AUTOMOTIVE
BY STEVE SWEDBERG
6
Donut service mark for
some time to display the
engine oil category, SAE
viscosity grade and fuel
conserving tendencies.
However, the OEMs were
concerned that their
newest vehicles would be
serviced with oils that were
designed for prior-year
models, and hence have
potential for big problems.
Before 1993, when
Document 1509 first codi-
fied the processes for
engine oil upgrades, the
need for engine oil
improvements was deter-
mined by an ad hoc com-
mittee. If someone (mean-
ing an automaker) wanted
to see an upgrade in the
specification, SAE Inter -
national would form a
committee to review the
request and to recommend
proceeding or not on
the years-long task of
developing a new engine
oil category. This needs
committee was a balanced
group drawn from engine
oil users (the OEMs) and
producers (oil and additive
industry types).
I know youll find it hard to
From time to time
Ive commented on
the development of
new engine oil categories.
The American Petroleum
Institutes voluntary
Engine Oil Licensing and
Certification System
(Document 1509) has
been the bible of engine
oil category development
as well as labeling for
the last 20 years.
The 17th edi-
tion of
EOLCS was
published
in Sept -
ember
2012 and is
available as
Continued on page 8
-
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-
believe, but there were dif-
ferences of opinion about
what constituted need.
For instance, when the
automakers said they need-
ed improvements in perfor-
mance, the oil industry
replied (not unreasonably),
Can you provide us with
some evidence of need?
The OEMs responded (not
unreasonably), what do
you need to see, baskets of
failed parts?
Improvements, of
course, are a bit subjec-
tive. Oil and additive com-
panies asserted that
engine oils had to protect
the engine from wear and
other damage, and did
8 APRIL 2013
Continued from page 6 exactly that. But OEMs
increasingly focused on
areas such as fuel econo-
my, emissions reductions
and the oils performance
over its service life.
Automakers also argued
that the API Donut, with
its string of alpha-numeric
codes, was not user
friendly. What consumers
needed was a simple logo
that could be shown in
vehicle owners manuals
and on containers of quali-
fied engine oils. That
would simplify the pur-
chase and assure the right
oil went into new cars.
What finally emerged in
1994 was another API
trademark, the so-called
Starburst certification sym-
bol still found on the front
labels of engine oil con-
tainers. The Starburst indi-
cated that the product had
the proper engine protec-
tion and fuel economy
performance, without
needing to check its API
category, and that it repre-
sented the latest and
greatest in engine oils.
Since succeeding cate-
gories of engine oil were
backwards compatible
able to service earlier vehi-
cles without risk an
owner could be confident
that his or her vehicle was
getting oil that would pro-
vide good performance.
Of course, the devil is
always in the details. From
the first, there was a lot of
anguish and hand-wring-Continued on page 10
AUTOMOTIVE
11. API administers volun-tary certification andlicensing program.
12. API administersAftermarket Audit
Program.
1. ILSAC/Oil determinesneed & timing.
2. ILSAC/Oil identifies testdevelopment needs and
alternatives.
3. ILSAC develops tests.
5. ILSAC/Oil develops draftspecifications.
6. Industry review of draftspec
7. ILSAC/Oil reviews comments.
9. ILSAC/Oil finalize spec.ILSAC issues spec.
10. API Lubricants Groupapproves licensing &
criteria.
The Current Route to New Oil CategoriesProcess for Developing New Engine Oil Performance Standards
for the API Certification Mark
Consumer Needs
Engine Requirements
Overall Timing
Regulatory Requirements
Lubricant Technology
4. Within agreed upontimeframe: Admin.
Guidance Panel forms afunding group if neces-sary; ASTM, CEC, JASOprovide comments on pro-posed draft spec; ASTM,CEC, JASO formalize tests.
8. API collects data ondemonstration oils.
Source: API 1509, Annex C
-
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known as ILSAC (which
now stands for
International Lubricant
Specification Advisory
Committee). AOAP is the
focal point for new catego-
ry developments which can
be requested by anyone,
although the OEMs are
typically the source of new
category requests. This is
very similar to Annex D.
One of the primary ques-
tions for AOAP is who can
be a member. While the
final wording of this sec-
tion of Annex C is still
being reviewed, the core
statement being deliberat-
ed is as follows: AOAP
membership shall consist
of automakers (auto) and
oil and additive companies
(oil) that have a material
interest in the specifica-
tion. The term material
interest is also being dis-
cussed, but seems to sig-
nify whoever makes vehi-
cles or engines as well as
whoever makes finished
oils, or additives for the fin-
ished oils.
Another concern is voting
within the AOAP. No final
rules have been set yet,
but there will always be a
basic tension between
users and producers as to
need, tests and limits for
every engine oil category.
In any negotiation, consen-
sus is always desired but
hard to obtain. There is no
difference here.
Heres another issue that
should hit everyone: who
pays! The cost of develop-
ing over what tests should
be used to measure perfor-
mance, as well as where to
set the test limits for certi-
fying a products quality.
Even more fundamental -
ly (and rather like a vam -
pire in a teenage horror
flick), the question keeps
arising: How do we know
we really need a new
engine oil specification?
Weve struggled through
the introduction of five
new light-duty categories
since the early 90s and it
isnt any easier. In fact, the
process is tough enough
that everyone wants to
improve it.
Fortunately, there is a
model to follow: Annex D
of 1509, the mechanism
for developing new heavy-
duty engine oils. It seems
to be functional and gets
the job done with compar-
atively little angst.
The API Lubricants Group
has been hard at work try-
ing to come up with a
process for gasoline-
fueled, light-duty truck and
passenger car engine oils
that covers the essential
questions and uses some
of the best of Annex D.
While nothing is finalized
at this point, some details
have begun to emerge.
First, a new group called
the Automotive Oil
Advisory Panel has been
formed. The AOAP will be
co-chaired by representa-
tives from API and the
automotive OEM group
ing a new category is hun-
dreds of millions of dollars.
Test development is
extremely costly and can
result not only in new tests
and engines but also
require new test stand con-
struction. When the new
generation Caterpillar
SCOTE engines were first
introduced, the test labs
needed to build new test
stands to handle the
increased power output of
the engines. So not only
the physical stand itself but
instrumentation may need
to be replaced or improved
when tackling an upgrade.
Assuming that Annex C
follows Annex D in general
format, after determining
need a development team
will need to be established.
Currently, PC-11, the next
heavy-duty engine oil
upgrade, is in this New
Category Development
Phase, and has a team
engaged in guiding the
development of tests and
limits for the new category.
Once that work is done,
the next phase is imple-
menting the new category
with licensing procedures.
This may include such
things as determining
when the new category
may be used, and how
long a lead time there
should be from final deliv-
ery of the category and its
tests to the first licensing
date. (Wishful thinking says
one year, but of late this
lead time has become
10 APRIL 2013
Continued from page 8AUTOMOTIVE
Continued on page 12
Weve struggledthrough the
introduction offive new light-duty categoriessince the early90s and it isntany easier. In
fact, the processis tough enough
that everyonewants to
improve it.
-
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For those who want to dive deeper,
API Document 1509 can be found at
www.api.org, under the area labeled
Certification Programs.
So where does this leave us? As
consumers, we will continue to see
oils introduced to meet the needs of
the vehicles on the road. Since all
categories so far have been back-
wards compatible, you can be sure
shorter due to constraints outside
the industrys control, such as gov-
ernment regulations).
In addition, designations for the
new category need to be intro-
duced, which may include API
nomenclature such as SN or
Starburst identifiers like GF-5. As I
said earlier, the devil is in the details.
12 APRIL 2013
Industry consultant Steve Swedberg
has over 40 years experience in lubri-
cants, most notably with Pennzoil
and Chevron Oronite. He is a long-
time member of the American
Chemical Society and SAE
International, where he was chair-
man of Technical Committee 1 on
automotive engine oils. He can be
reached at [email protected].
that when you buy oil at your local
big box or automotive parts store,
the Starburst on the container
assures you that the oil will satisfac-
torily protect your engine. Your local
oil change outlet should have the lat-
est and greatest in its bulk storage
tanks or on its shelves, ready to pro-
tect your engine and provide long,
efficient operation. Your automobile
dealers service bays should stock
the oil your car or light truck needs
for optimum performance.
Lest anyone think that the intro-
duction of new oil categories is a
piece of cake, it takes many individu-
als from various parts of the overall
industry working together to develop
each specification and to formulate
the oils needed to meet those speci-
fications. Sometimes it can get a bit
contentious, but in the end the
needs of all parties are met and con-
sumers receive the benefit. Id say
the people doing all of this deserve
a big Atta boy for their efforts and
their dedication.
Continued from page 10
-
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of base oil, according to statistics
recently released by the U.S. Energy
Information Agency. Thats 7 percent
below the 62 million barrel mark hit in
2011, and 4 percent less than the
60.2 million barrels refined in 2010.
(Still, it was better than the low-tide
year of 2009, when base oil output
plunged to 55 million barrels.)
The 2012 total included 47.2 million
barrels of paraffinic base oil, and 10.4
million barrels of naphthenic base oil
(versus 50.6 million barrels and 11.4
million barrels, respectively, in the
prior year).
From January to June, the countrys
refiners produced 29.3 million barrels,
but in the second half of 2012 they
only managed 28.3 million barrels of
output.
That second-half downturn in out-
put was due almost entirely to wors-
ening paraffinic production. After
reaching 24.2 million barrels in the
years first six months, second-half
paraffinic volumes tapered off to 22.9
million barrels.
A big contributor to this million-
plus-barrel decline, and one of the
years most painful events, was an
Aug. 6 fire in the crude unit at
Chevrons Richmond, Calif., refin-
ery. Richmonds 20,000 barrel/day
API Group II lube unit was not dam-
aged in the fire, Chevron quickly
assured customers. But it did not
14 APRIL 2013
U.S. Base Oil Dimmed in 2012
Continued on page 16
Although U.S. base oil
refiners opened 2012
on an upward surge,
their monthly output
started to wobble in
the summer and then proceeded to
lose momentum until the year finally
drew to its close.
By then, U.S. base oil refineries had
produced a total 57.6 million barrels
Exports were abright spot in
lackluster year
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We can really changethe way you see things
-
operate at anywhere near normal
capacity for the rest of the year.
Leading up to the fire, Richmond
had been averaging about 520,000
barrels of base oil a month, the EIA
data indicate; afterward, it averaged
barely one-fifth of that volume.
Pressing MattersJeremy Kriska of Tulstar Oils in Tulsa,
Okla., cited a number of additional
factors that may have further
depressed domestic base oil produc-
tion. One thing may have been the
slowdown in the European econo-
my, he observed. That led European
producers to become very aggressive
on pricing, and we saw them export-
ing more base oil to North America.
Second, a large amount of rere-
fined base oil is now on the market,
much of it API Group II quality, and
we may be seeing some impact of
that, he said. U.S. rerefiners name-
plate capacity for making Group II
has grown to more than 11,000 bar-
rels/day, according to LubesnGreases
research. Rerefiners do not report
their base oil production volumes
to the EIA, however, so their
impact is not captured in the
agencys data.
Third, new Group III base oil refin-
ers in the Middle East Neste-
Bapco in Bahrain and Shells Pearl
project in Qatar began ramping up
exports, too. So there was more
competition here, and more choices
for U.S. buyers, Kriska said.
16 APRIL 2013
Continued from page 14
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One thing may havebeen the slowdown in
the European economy.That led European pro-ducers to become veryaggressive on pricing,
and we saw themexporting more base oil
to North America.
-
Together, these factors helped to
push down base oil prices significant-
ly starting in July. And as values
declined, Kriska said, U.S. refiners
began to trim back their base oil
units operating rates rather than
endure unacceptable margins on their
feedstock.
Refiners also tend to slow down as
the year winds down, he added, to
avoid carrying too much inventory at
the year end.
The New Normal?A base oil marketer in the Houston
area, speaking on condition of
anonymity, said the market has
become quite cyclical as the year pro-
gresses. U.S. producers typically see
17LUBESNGREASES
0
1
2
3
4
5
6
2012
2011
Dec.Nov.Oct.Sept.Aug.JulyJuneMayApr.MarchFeb.Jan.
Mill
ion
Barr
els
U.S. Monthly Productionof Base Oils
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Source: EIA
-
rising sales from March to May, this
marketer explained, as the prelude to
the driving season. Then, they may
continue to operate at high rates dur-
ing the summer, building a cushion
of safety stocks against the hurricane
season ahead.
By the end of the third quarter,
this source added, now they have to
work off the hurricane stocks, so
they may slow down production
some. And then youll see destocking
until the year end, to pull down their
inventories for tax reasons before the
year closes.
Industry consultant and base oil
expert Terry Hoffman, in San Antonio,
tended to agree. We seem to be on
a cycle, where the first half of the
year goes well, and people produce
and buy a fair amount of base oils.
Then, in the second half, the market
takes a step change down, until final-
ly, in November and December, we
see people try to pull their inventories
down, due to inventory taxes that
Louisiana and Texas put on whatever
refiners have in their tanks at year
end. They want to avoid that tax.
Naphthenics seemed to be doing
okay all year, Kriska pointed out.
Although production was off 8.4 per-
cent from 2011, the 2012 volume of
10.4 million barrels was right in line
with levels that have been typical
since 2004. Unlike paraffinic base
stocks, pale oils did not see any
slackening of productivity in the sec-
ond half of the year; they actually
moved at a quicker pace from July
to December.
Incoming TidesU.S. base oil producers also faced
stiff headwinds from imports last
year. Total imports rose to 10.7 million
barrels, versus 10.1 million barrels
in 2011.
Dallas-based Jamie Brunk, manager
of lube studies at the research firm
Solomon Associates, reminded
that 2012 saw a number of new
opportunity base oil plants begin to
unleash large volumes of material.
Opportunity plants are primarily built
to produce base oil for the global
merchant market, rather than to
assure supply for the operators own
finished lubricants.
Group II and III plants are cheap-
er to build and operate, too, Brunk
18 APRIL 2013
Continued on page 20
0
10
20
30
40
50
60
Naphthenic
Paraffinic
2012201020082006200420022000
39%SouthKorea
21%Canada
20%Persian
Gulf
20%Rest ofWorld
20%Canada
22%Rest of World
4% Central America17% Mexico
15% OtherSouth
America
11% Brazil
11% EU
Top U.S. Base Oil Trading Partners in 2012
Imports10.7 million barrels
Exports27.3 million barrels
Source: EIA
Yearly U.S Refinery Production of Base Oils (million barrels)
-
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SUCCESSTOGETHER
SUCCESSTOGETHER
-
pointed out, and all that new
material got dumped into the global
playing field. The bad news or
good, depending on your vantage
point is that more new Group II
and III plants are under construc-
tion, including sizable ones in the
United States, Spain, Abu Dhabi,
China and Russia.
The largest sources of 2012s base
oil imports continue to be South
Korea, with 39 percent of the total,
and Canada (21 percent), but they
have now been joined by Qatar,
home to the Pearl project, and
Bahrain, where Neste-Bapco began
operating last year. Pearl sent 1.5 mil-
lion barrels to the U.S. in 2012, and
Neste-Bapco brought in 603,000 bar-
rels. Both Pearl and Neste-Bapco are
Group III producers.
Hoffman said imports of Group III
base oils have grown as we get into
better-quality motor oils, like SAE 5W-
20 and 5W-30, and 10W multigrade
heavy-duty oils. All these are needed
more and more for fuel economy
benefits, and they need the same
base oil viscometrics. So demand for
Group III keeps going up.
Flowing OutU.S. base oils also are part of a
global trade, he emphasized. We
suck in a lot of Group III now,
Hoffman continued, and Shell
seems to be pushing in a lot from
Pearl. Meanwhile, more Group II is
going out of the United States to
enable the multinationals to pro-
duce their global heavy-duty engine
oil formulations.
The export side was very favorable
to U.S. material, and rose 9.6 per-
cent. A total 27.3 million barrels
were shipped in 2012, versus 24.9
million barrels in the prior year. In all,
more than 47 percent of the total
U.S. base oil production was shipped
outside its borders in 2012, the EIA
data show. Here too, though, the
greater portion of shipments were
made in the first half of the year,
while the second halfs shipments
were less robust.
By destination, the largest recipient
of U.S. base oil exports was Canada
(traditionally the largest trading part-
ner); 5.4 million barrels went north in
2012, versus 3.2 million barrels in
2011. The next biggest buyer was
Mexico, with 4.6 million barrels in
2012 (compared to 3.7 million in
2011). Third place as usual was
Brazil, with 2.9 million barrels taken,
versus 2.6 million the year before.
Exports have become something of
an escape valve for U.S. oversupply,
in fact. The two products most likely
to hit foreign shores include Group II
and naphthenics, said Hoffman, but
substantial amounts of Group I ship
out, too.
Heading now into spring, the current
market is looking steady, and steadily
better as each week passes, accord-
ing to the unnamed Houston base oil
seller. Sales look good, he indicated,
especially for Group III base oils.
Demand seems fine, its not too
low, not too high just coming
along nicely, said Tulstars Kriska.
Were not seeing weakness on the
demand side, at least not from our
customers.
20 APRIL 2013
Continued from page 18
with Rob Coffin, Ph.D.
Q:Does a higher viscosity index (VI) always reflect a better quality base oil?
A: Having a high viscosity index helps to protect an engine at extreme temperatures. However, VI doesnt tell the whole story. VI only tells us about the viscosity/temperature relationship between 40 C and 100 C (104 F and 212 F). It fails to tell us anything about viscosity above or below those temperatures. High temperatures can thin and break down oil, crippling its lubricating ability, whereas low temperatures can rob a lubricant of its ability to reach critical parts. Where low temperatures are concerned, two lubricants with the same VI may perform dramatically different at temperatures lower than 40 C; for example at -20 C (-4 F), the viscosities of the two lubes can be thousands of centipoise (Cp) different. This is clearly illustrated by noting the differences between a Group III mineral oil and Synfluid PAO 5 cSt, both having 144 VI, in the Scanning Brookfield chart below.
Lubes made with PAOs demonstrate an inherently high viscosity index and maintain excellent low-temperature performance, compared with mineral oils. While viscosity improvers can enhance VI, they can break down over time, resulting in diminished performance. The reason a PAO is selected as a lubricant basestock is its ability to improve performance and solve problems. Give us a call, and well be glad to discuss your applications to determine how Synfluid PAOs can help deal with your low temperature issues.
www.synfluid.com [email protected]
Toll Free: 800.231.3260
2013 Chevron Phillips Chemical Company LPSynfluid is a registered trademark in the U.S. and other
jurisdictions owned by Chevron Phillips Chemical Company LP
-
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Idont know about you, but myeyes are not what they used tobe. I say this because there was aday when I could read what wasprinted on the back of motor oil bot-tles. Stuff written there was legible;big enough to see. Sure I can still
see important information suchas the oils viscosity grade, APIand ILSAC Service category, theAPI donut. And theres nomissing the obscure barcodes and quick-responsecodes. But now, even withmy glasses on, I oftenstruggle to read some ofwhats written on theback labels.
At my age, youworry about thingslike this. Could itmean presbyopia,cataracts, glauco-ma, maculardegeneration orsome other age-related eye prob-lem? Or is some-thing else goingon?In a semi-panic
after struggling toread some of theback labels on oil
containers at Wal-Mart,I recently decided it wastime to see a vision spe-cialist. And at the risk of
having him refer me for diag-nostic psychological testing, Ibrought some motor oil bottleswith me.
My glasses indeed were mis-aligned and in need of adjustment,
he said, and my eyes were in factchanging with age but these werenot the reasons I was struggling toread the labels. Instead, after carefulinspection of the labels on the motoroils I brought along, he said the 6-point font on the labels was toosmall, the color contrast was notideal, and the spacing between let-ters and words was very tight.
In short, his diagnosis was that myeyes were fine but the labels hadissues: They were too crammedwith information. With that, Ibreathed a sigh of relief and decidedrather than questioning my eyesight,maybe it was time to take a closerlook at how labels have changedover time.
Looking back, the first observationis that some things have notchanged. The real estate available toprint info on the back label of amotor oil bottle is one example. Thatspace has remained at roughly 3inches by 4 inches for decades.
But although the size of the labelhas remained nearly the same, onechange that occurred was the needto make space on the label for aUniversal Price Code. The UPC com-prises a unique 12-digit number andbarcode used for scanning tradeinformation at the point of sale, forautomated checkout and inventorycontrol. Whereas UPCs are generallymeaningless to consumers, they arevitally important to retailers, so UPCsnow occupy somewhere between 7and 15 percent of the back label on aquart of motor oil. Thats a lot ofspace for something consumers gen-erally cant read or understand.
Another big change on the back
Cramming: Can less be more?
NEED TO KNOW
BY THOMAS F. GLENN
APRIL 201324
lightpoet - Fotolia
-
25LUBESNGREASES
label speaks to diversity and theappreciation that Hispanics representan important and growing segmentof the U.S. population, and the do-it-yourself motor oil market. Although itdiffers by lubricant manufacturer andregion, many motor oil labels arebilingual. Thats very helpful toHispanic consumers, but the realityis, it takes more space. In fact, theinclusion of Spanish on the backlabel can consume 15 to 30 percentof the available space.Also taking space on the back
labels of motor oils are the neces-sary warnings about the dangers ofskin contact with used oil, keeping itout of reach of children, and con-serving resources by recycling.Taken together, this material canaccount for as much as 8 percent ofthe back label. Add this to the 5 per-cent required to include contactinformation on the products manu-facturer, marketer and/or distributor.Then add a date of manufacture orbatch code, too.And just when you think there is no
space left for anything more on theback label, toss synthetics claimsinto the mix, add some slick graphicscomparing the attributes of variousbrands, weave in some creativeadvertising ideas for cross-merchan-dizing, and if needed, expand theback label to be a three-page pull-outor peel-off. Why not include a magni-fying glass and decoder ring as aprize for those truly interested inreading the label?Then again, maybe less could be
more. What about that obscure QRcode on the back label? What if therewere a smart-phone application that
knew the make and model of yourcar and allowed you to scan the QRcode on the motor oil label to see ifthe product meets that vehicles war-ranty requirements and is APIlicensed? What if that same app gaveyou the most current data andapprovals on the product, customerreviews, independent test data andanalysis? In addition, the app couldlet you know where to get the bestdeal on that product and others likeit, plus coupons and rebates.Surely younger, digital-savvy buyers
would find such an enriched QR andapp useful. The same could be saidfor older folks like me if the appprovided an opportunity to make thefont size larger and showed the textwith a high-contrast background andbetter spacing between characters.In todays day and age, thats not
asking for much.
Tom Glenn is president of the consulting firm PetroleumTrends International, the PetroleumQuality Institute of America andJobbers World newsletter. Phone: (732) 494-0405. E-mail:[email protected]
-
26 APRIL 2013
They Wrote thePlaybook
Rerefiners Team Aims to Repeat Earlier Success
BY RICHARD BEERCHECK
Heritage-Crystal Clean hopesto expand its rerefinery inIndianapolis.
-
HES generally focused on largeindustrial customers, but it had somedemand for waste collection and recy-cling from smaller firms. To addressthe needs of smaller customers, HEScreated a service called PetroleumManagement to pick up small quanti-ties of used lubricating oil, and anoth-er called Crystal Clean to provide sol-vent parts-cleaning services, saidGreg Ray, Heritage-Crystal Clean chiefoperating officer. By the 1990s,Crystal Clean and PetroleumManagement were generating annualrevenue of about $10 million, con-centrated in the Midwest.Separately, during the 1960s, a
Chicago-based businessman namedDon Brinckman had acquired a smallbusiness called Safety-Kleen and putin place a plan to develop the partscleaning business across the U.S.Over the next 30 years, Ray added,Brinckman grew Safety-Kleen into a$1 billion company with more than160 branch locations in the U.S. andCanada, providing a wide range ofenvironmental services to hundredsof thousands of small customers.In 1987, Brinckman decided that
Safety-Kleen should expand into usedoil recycling, so he acquired Breslube,based in Breslau, Ontario, whichChalhoub had built into a successfulNorth American rerefiner. Chalhouband his team joined Safety-Kleen andled a vigorous expansion of used oilcollection and rerefining, said Ray,ultimately building the largest rere-finery in the world, in East Chicago,Indiana.In 1998, though, Safety-Kleen fell
victim to a hostile takeover engi-neered by Laidlaw Environmental
W ith consumerattitudesbecomingwarmer towardrerefinedengine oils,
demand for them is increasing. Inresponse, one of the largest U.S. col-lectors of used oil, Elgin, Ill.-basedHeritage-Crystal Clean, invested in a50 million gallon per year rerefineryin Indianapolis. Earlier this year,LubesnGreases visited the facility tolearn more about its capabilities andthe companys plans for the future.Although Heritage-Crystal Clean was
organized in 1999, its history can betraced to The Heritage Group, a family-owned business founded inIndiana in the 1930s. The businessstarted out distributing fuel oil, andunder family management it was suc-cessful and achieved steady growth,explained Heritage-Crystal CleanPresident and CEO Joe Chalhoub. Inthe 1970s, THG expanded by found-ing Heritage Environmental Services(HES) to collect and recycle wastes.
Services, a Canadian company in thehazardous waste business. Laidlawmanagement dismissed the top Safety-Kleen management and relocated thecorporate headquarters to Columbia,S.C., Ray noted. Ultimately, theembattled company was driven to filefor bankruptcy.Safety-Kleen emerged from bankrupt-
cy in 2003 and soon began to grow andbuild again. Still North Americaslargest rerefiner, in December it wasacquired by Clean Harbors for $1.25billion. Long before, though, its rerefin-ing management team had moved on and many of them landed atHeritage-Crystal Clean.
Out of the AshesAfter the Laidlaw takeover, I had to sitidle for 12 months to observe my non-compete restrictions, said Chalhoub.But after that time had elapsed, I wasready to develop a new businessopportunity for myself and otheremployees who had exited Safety-Kleen with me. He connected withthe family that owned THG, and
27LUBESNGREASES
-
develop a strong growth culture. Wehired branch managers and created aregional structure to support local oper-ations. The company also welcomedDon Brinckman as a director in 2002.The company was profitable by 2004
and generated sales in excess of $100million by 2008, Chalhoub added. Thatyear, the company had a successful ini-tial public offering as Heritage-CrystalClean Inc.
together they determined that theCrystal Clean business would provide agreat foundation for a new companyfocused on serving the environmentalneeds of small customers.THG contributed the Crystal Clean
and Petroleum Management assets to anew entity called Heritage-Crystal CleanLLC. At the outset, Chalhoubexplained, Heritage-Crystal Cleanplanned to expand geographically and
For the year justended, Heritage-Crystal Clean hadrevenues of $252million, including$108 million in oilproduct sales, large-ly base oil. Netincome for 2012was $2.3 million.Greg Ray (also a
Safety-Kleen alumnus) explained thatduring its first decade, HCCs businesswas focused on environmental services;namely, parts cleaning and hazardouswaste drum collection, recycling anddisposal.By 2010, we were preparing to enter
the used oil rerefining business, hesaid. Most of our senior managementhad worked in used oil collection andrerefining earlier in their careers, and itwas a natural move to get back into thisbusiness.To support this initiative, the compa-
ny constructed the Indianapolis rerefin-ery, now the second largest in theUnited States. The plant reached fulloperation in January 2012, using vacu-um distillation and hydrotreatingprocesses to produce base oil. Wevemodified the typical rerefining installa-tion somewhat, said Tom Hillstrom,vice president of operations, and basedon our results, were satisfied with thenew design.Today, we operate 71 branches in 40
states, with roughly 900 employees,said Chalhoub, and our annual revenueis approximately $250 million, dividedequally between environmental servicesand our oil business. The branchessupply 75 to 80 percent of the used oilinput to the Indianapolis plant; theremainder is purchased from other col-lectors.
Products & MarketsRay said, Within environmental ser-vices, we offer parts cleaning; drum col-lection, recycling and disposal; and vac-uum truck services. Our oil businessincludes used oil collection and recy-cling, oily water collection, and the sale
28 APRIL 2013
Continued on page 30
Joe Chalhoub
-
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this business comes from generatorsengaged in vehicle service, such as autodealers, quick lubes and trucking com-panies. The other half is from smallindustrial or manufacturing plants.Customers for the base oil produced
in Indianapolis include independentblenders and compounders and majoroil companies. We decided to build thererefinery in Indianapolis after perform-ing an extensive study of a number of
of products and byproducts from ourrerefinery. The companys rerefineryproduces API Group II base oil, as wellas byproducts such as hydrotreated fueland asphalt extender.Our customers include tens of thou-
sands of small generators of used oiland hazardous waste in 40 states,almost everywhere except for the PacificNorthwest, said Ray. Roughly half of
possible locations, said Hillstrom. Weknew that we would be shipping usedoil to the plant from our widespreadbranch network by rail, and we neededa location that offered competitive railfreight rates. Indianapolis was the mosteconomical of the sites we studied.The company already had a sizable
operation in Indianapolis, includingavailable land to build the plant and sig-nificant available tankage. Finally, the cityand state offered incentives that madeIndianapolis the most attractive choice.Before we built the rerefinery, we
were already in the business of pickingup waste from small customers, saidRay. These customers generate usedsolvent, hazardous waste and used oil.And they told Heritage-Crystal Cleanthat they wanted us to expand intoused oil collection to be able to handleall their requirements related to liquidand hazardous waste.Since we knew something about the
business, said Hillstrom, we felt wewould be unable to offer a competitiveand successful program until we had arerefinery behind us to upgrade thevalue of the used oil.We had built a successful used oil
collection and rerefining business earli-er in our careers, Chalhoub added. Inaddition, we knew that business hadproven profitable for the new owners,and we felt that with dedication andpatience we would be able to repeatour success in a market that has roomfor new entrants.
Making Their MarkIn all the markets where we compete,Ray observed, we face vigorous compe-tition, mostly in the form of lowerprices. For example, in February thecompany noted that the average spotprice for Group II base oil declined byabout 5 percent in fourth quarter 2012,compared to the third quarter. Thisdeterioration followed a drop ofapproximately 10 percent from the sec-ond quarter to the third quarter.In early 2013, Group II spot prices
were still slipping, prompting ChiefFinancial Officer Mark DeVita to state,We believe that current base oil pricing
30 APRIL 2013
Continued from page 28
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burdens from our customers.We dont have many challenges
stemming from government regula-tion, said Ray. In most cases, when wehave an opportunity to provide input tolegislators or regulators, we feel it isbest to encourage the government toplay a very limited role. We think thatexisting penalties for improper waste
and the resulting spread between crudeoil and lube oil prices reflect conditionsthat are not sustainable in the long runfor the virgin production of lube oilfrom crude. Indeed, as this issue goesto press, some upward pressure wasbeing seen in Group II postings.
On the environmental services side ofthe business, Hillstrom said Heritage-Crystal Clean anticipates a continuingshift away from solvent-based partscleaning toward aqueous parts cleaning.This business is among the fastest-growing parts of our company. We haveacquired patents on some aqueousparts-cleaning machines, and we haveinvested in the development of a lead-ing aqueous cleaning chemistry.
He outlined the companys philoso-phy of trying to help small shops thattypically are not very experienced withthe requirements for hazardous wastemanagement: We try to design our ser-vices so they are easy to use, andremove administrative and economic
management are sufficient to discour-age intentional pollution, and moreusually can be accomplished by enforc-ing existing rules than by adopting new ones.
Look to the FutureHeritage-Crystal Clean been growing itsrevenue at an annual rate of more than
32 APRIL 2013
Continued from page 30
From used oil (left), Heritage-Crystal Clean produces API Group II quality base oils suchas this 150N cut (right).
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20 percent for the past decade, Raypointed out. The company hopes to con-tinue to see double-digit top-line growththrough a strategy that combines: Geographic expansion, as it contin-
ues to open new branches and fill inthe map. Increasing sales at existing locations
by signing up new customers and sell-
ing more services to current customers. Product line extensions through
expansion into new lines of business.Aqueous parts cleaning, for example, isa quickly changing arena, so the compa-ny has launched a new line of AquaFiltration Service products. Expanding the used oil rerefining
business. The Indianapolis plant has an
operating capacity of 50 million gallonsof used oil per year, and Heritage-Crystal Clean has secured permits toexpand this to 75 million gallons/year.The company is also looking to grow
by acquisition. While we have maderelatively few acquisitions in recentyears, we are always evaluating opportu-nities to add to our organic growth orexpand our service territory via anacquisition, said Chalhoub.At the beginning of this year, the com-
pany acquired a controlling interest inMirachem LLC, which supplies aqueousfluids for parts cleaning. With theMirachem chemistry and our patentedaqueous parts-cleaning equipment,Chalhoub said, we are very excitedabout the potential of our aqueousparts cleaning service offering.He ended by saying, Our success
going forward is ultimately based onour ability to sustain a growth culture,where our employees are working tocreate a larger and more successfulcompany.
33LUBESNGREASES
The plants hydrotreater
-
Three years ago, the ship switched tohandheld lubricant condition monitors,and one year ago added a portable vis-cometer to its oil testing arsenal.The portable instruments help us get
more done in less time while providingresults that are more accurate and reli-able than single-test kits, said OceanShipholdings William Maus, chief engi-neer of the USNS Watson. When Ishow them to engineers from otherships they ask, when can we get ours?
Major military moverMilitary Sealift Command operatesapproximately 110 non-combatant, civil-
The United StatesNaval Ship (USNS) Watson is one of thelarge, medium-speed, roll-on, roll-offships that have significantly expandedthe nations sealift capacity. The Watsonhas a considerable amount of machin-ery, including main engines, generatorsand cranes, that need oil tested on aregular basis to detect potential prob-lems and eliminate the possibility of acatastrophic failure. Operated by OceanShipholdings Inc. under contract to theMilitary Sealift Command, the Watsonpreviously used oil test kits but foundthem time-consuming. Its engineersquestioned the kits accuracy, too.
ian-crewed ships that replenish U.S.Navy ships, strategically pre-positioncombat cargo at sea around the worldand move military cargo and suppliesused by deployed U.S. forces and coali-tion partners.The Watson can carry a variety of mili-
tary equipment in support of Army andMarine Corps operations. The Watsonand other ships of its class were themajor transporters of military equip-ment during Operations EnduringFreedom and Iraqi Freedom and duringthe military operations in Afghanistanand Iraq that began after the September2001 terrorist attacks.
34 APRIL 2013
NavalSealiftShipPuts
Accuracyto theTest
BY DAN WALSH
USNSWatsonunderway
-
The Watson is 950 feet long, has abeam of 106 feet, a fully loaded dis-placement of 62,644 tons, and a ser-vice speed of 24 knots. It has a cargo-carrying capacity of more than 380,000square feet equivalent to almosteight football fields. There are two gasturbine engines, each with an outputof 32,000 brake horsepower (bhp), dri-ving two shafts with 24-foot control-lable pitch propellers at 95 rpm at fullpower. The ships diesel generators arecapable of producing 12,500 KW ofelectrical power. The ship has manyhydraulically powered cranes, cargodoors and ramps.
Oil: Critical to missionOur engineering department consistsof 11 people, which is not a lot for a950-foot ship, Maus said. We areresponsible for millions of dollars ofmachinery which could at any momentbecome critical to our national defense.As in all major Navy ships, oil analysisplays a critical role on the Watson byalerting us to problems that have thepotential to damage a vital system. Theinformation provided by oil analysisenables Maus and his team to efficientlyallocate scarce resources and to planmaintenance based on actual need asopposed to simple intervals of time.
35LUBESNGREASES
In the past, Watson engineers usedtest kits for oil analysis. Engineers col-lected oil samples, brought them backto the control room, and mixed themwith the chemicals in the test kit. It wasnecessary to perform tests in the con-trol room in order to maintain a stableenvironment for the test chemicals andfor the test equipment. The chemicalsused in the testing process are classifiedas hazardous, which poses problems forshipping the chemicals and disposal ofthe used reagents.Normally, it takes about five minutes
to collect a sample, five minutes tobring it back to the control room, and
U.S. Army tracked vehicles are loaded aboard the roll-on, roll-off ship USNS Watson. (USAF photo by Staff Sgt. Ricky A. Bloom)
-
leum-based lubricants and fluids. It candetermine lubricant contamination,degradation and cross-contamination atthe point of use by measuring key oilcondition parameters. FluidScan canreadily determine total acid number(TAN), total base number (TBN), oxida-tion, nitration, sulfation, additive deple-
tion, incorrect lubricant, water, glycol,soot, glycerine and FAME (fatty acidmethyl esters) in biodiesels.The SpectroVisc Q3000 was designed
to determine kinematic viscosity in thefield, for applications when immediateresults are required to determine thehealth of critical equipment. Thisportable, battery-operated instrumenthas a touch-screen interface and isdesigned to be easy to use. Requiringno solvents, no density checks and nothermometer, the SpectroVisc Q3000measures each sample at a constanttemperature, for consistent accuracywithout pre-test measurements.
Hours savedThe first thing we noticed was thatSpectros instruments greatly simplifythe process of measuring oil condi-tions, Maus said. The instruments arelight and dont require any chemicals orextra steps, so you can carry them tothe machinery and perform the analysison site. Additional benefits he notedwere a major reduction of the quantityof oil required for testing, and no gener-ation of hazmat that requires disposal.The FluidScan Q1000 measures the
full range of oil condition parameters inabout five minutes, the same time that
five minutes to perform each of the fivetests required for generator oil, for atotal of 35 minutes. Maus was con-cerned about accuracy and repeatabilitybecause the tests were dependent onusing the right amount of both oil andchemicals, and on the reliability of thekits base equipment. He was also con-
cerned about the need to work withhazardous chemicals.Alternatives were found with the
Spectro FluidScan Q1000 handheldlubricant condition monitor, and theSpectroVisc Q3000 portable viscometer.The Q1000 performs 87 tests and pro-vides 174 results in about two-thirds thetime it took to conduct 138 tests yield-ing 138 results with the chemical testkit. But Watsons operators wanted tobe sure these test results were accurateand reliable, not just fast.
Head-to-head comparisonThe USNS Watson was one of twoMilitary Sealift Command ships asked toperform a head-to-head comparison ofthe traditional one-test-at-a-time kitsversus portable instruments that oper-ate on the same principles as laboratoryinstruments. To evaluate the perfor-mance of the kits versus portable instru-ments, Watson personnel were asked toperform a specified number of tests intriplicate once on a test kit, one on aportable instrument, and also by send-ing a sample to a lab on shore.The FluidScan Q1000 is a rugged,
handheld infrared spectrometer thatmeasures a range of key oil conditionparameters in both synthetic and petro-
is required to measure a single parame-ter with a test kit, Maus said. He calcu-lated that it takes five minutes to take asample of oil from a diesel generator,five minutes to measure critical parame-ters on the oil condition analyzer at thegenerator, and five minutes to measurethe viscosity, for a total of 15 minutes.Thats less than half the time requiredwith test kits.When we are sitting in port and not
operating a lot of equipment, we saveabout 10 hours per week, Maus said.When we are under way the savingsare approximately 15 hours per week.The responsibility for oil analysis isassigned to a licensed engineer withmany other responsibilities, so thesetime savings make his job much easierand allow more efforts to be focused onmaintenance and repair throughout the ship.
Proving accuracyA key part of the head-to-head assess-ment was comparing the accuracy of
the portable instrumentsto the test kits. Testingby an independentlaboratory showed
thatthe
portable instruments were consistentlyaccurate over the full range of measure-ment parameters. The accuracy of thetest kits, on the other hand, varied fromgood to poor depending on the specifictest and the care taken by the personrunning the test.For example, problems were identi-
fied in the measurement of TBN withthe test kits. This measurement is usedon diesel engine oil to measure addi-
36 APRIL 2013
Continued on page 38
Oil viscosity results are vis-ible in the Q3000 display.
Testing air compressor oil aboard theUSNS Watson, using the Q3000
The Q1000 handheld
-
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was in doubt. The FluidScan Q1000, onthe other hand, accurately measuresTBN without being dependent onmanufacturers specs. The portableinstruments also provide many addi-tional measurements at no additionalcost or time.
Maus added that another benefit ofusing portable instruments is that
tives used to neutralize acids producedas a byproduct of combustion. The testkit measurement is based on andrequires entry of the original TBN inthe oil. Ships engineers entered thisvalue based on the specifications pro-vided by the oil manufacturer; howev-er, the accuracy of these specifications
their higher accuracy increases theconfidence in their results and leadsto greater predictive maintenanceefforts. The accuracy of the portableinstruments gives us confidence tobase our predictive maintenance pro-gram on their results. We can trackexactly whats going on and identifyproblems in plenty of time to takecorrective action. At the same time, ifthe results look good we can extendthe service life of the oils to save timeand money. In addition to the advan-tages this equipment offers, theportable instruments are actually lessexpensive than the test kits previouslyused, which required replenishmentof chemicals and periodic recalibra-tion of the base unit.
At the end of the trial period, ourguys did not want to give up theSpectro instruments and go back tothe test kits, Maus said. The Navyagreed that the Watson could continueto use the Spectro kits while they con-tinued their evaluations. We are hope-ful they will decide to switch the entirefleet over to the new portable instru-ments. The end result will be increasedaccuracy and more measurements,which in turn will provide higher mis-sion readiness, lower maintenanceexpenses, and time savings that can beapplied to other shipboard projects.Our future goal is to integrate theresults from the new instruments intothe ships computer based mainte-nance program so measurementresults will automatically be available toshore-side personnel within 24 hoursafter samples are tested.
Daniel Walsh is director of productmanagement for Spectro Inc. Spectro,based in Chelmsford, Mass., special-izes in analytical instrumentationand software for machine conditionmonitoring, and is one of the largestsuppliers of oil and fuel analysisinstruments to industry and the mili-tary worldwide. For more informa-tion, visit www.spectroinc.com orphone (978) 431-1120.
38 APRIL 2013
Continued from page 36
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Given the lubricantsindustrys limitedresources, its time tofocus attention andresources where theyadd value and not
on needless complexity such as redun-dant engine tests, urges Trevor Russellof Infineum.Complexity, said the additive compa-
ny executive, can be both the friendand foe of the lubricants industry. It isthe driver for many niche opportunities
40 APRIL 2013
IS COMPLEXITY ASIGN OF PROGRESS?Not unless it adds value, says Infineums
Trevor Russell. Lets be sure it does.
BY LISA TOCCI
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and is what enables product differentia-tion, he allowed. Yet some processesand procedures especially thoseused to develop engine oil specifica-tions and tests have become moreresource-sapping than they should be,and risk the industrys ability to inno-vate and grow.
On the one hand, complexity canbring endless opportunities for differen-tiation and niche developments,Russell told the ICIS World Base Oils &Lubricants Conference on Feb. 22. On
the other, it can bring consumer confu-sion, duplication of effort and cost.
Russell, Infineums Abingdon, U.K.-based chief strategy officer and salesand marketing vice president, listednumerous areas where complexity is onthe rise. There are more original equip-ment manufacturers to be satisfied,more farflung geographic markets to bereached, more engine hardware typesthat demand attention, and increasingvariations in the base stocks particu-larly API Group IIIs that blenders
want to use in their lubricants.Perhaps life seemed simpler in the
1980s and 1990s, after the emergenceof truly global OEMs, Russell noted.Those OEMs required suppliers withequally global capabilities, and that ledto a landscape where a handful of majoroil companies in each geographic areahad significant market shares.
Today, he added, the picture ischanging again, driven by the enormousdemographic and economic changesthat we see on a global scale. Now weare operating in an industry where themajor markets in the West are matureand experiencing much lower growth,even shrinkage, while those of thedeveloping economies in Asia, EasternEurope, Russia and Latin America aregrowing rapidly.
Oil and additive companies arealready investing in these high-growthregions, Russell stressed. The shifteast of vehicle manufacturing has beenfollowed by lubricant production, asseen with the announcement of manynew blending plants in China andSoutheast Asia. At the same time, wealso see movement in the oppositedirection, with rising [national oil com-panies] in emerging countries havingclear global growth aspirations.
This mutual movement into newterritory has the potential to createtension, as established global giantsmove east and south, while thegrowth-economy nationals move westand north, he said.
Of course, as it shifts east withdemand, the lubricants industry can-not neglect the established marketsof North America, Western Europeand Japan, Russell said, even if theseare seeing flat or falling lubricantsconsumption. They are still thesource of most new lubricant specifi-cations, and organizations such as APIand ACEA remain the bedrock ofglobal specifications.
41LUBESNGREASES
Complexity can drive innovation, or cansimply drain resources. For example,would a smaller, more streamlinedprocess be better for engine oil categorydevelopment?
Illustra
tion
: Infineu
m
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Neste-Bapco, GS-Caltex and Chevron,SK-Pertamina and Shell, to name someof the largest. These companies usediffering processes and feedstocks,and interchange is minimal, so inten-sive testing programs arerequired when blendersconsider a change of suppli-ers.Group IIIs rise has been
accompanied by the demiseof uncompetitive Group Iplants, which results in thepotential for a significantamount of reformulationwork and/or brand reposi-tioning, he said. Form -ulators also must work across a widespectrum of viscosity grades, frommonogrades to SAE 20-50 and nowdown to the new 0W-16 grades.Costs are also climbing sharply
for engine oil development programs,such as the API C categories that formthe basis of most global heavy-dutydiesel lubricants, Russell said. Forexample, API CF required a candidateoil to pass only two engine sequencetests; todays API CJ-4 oils must pass 19
The level of complexity linked tospecifications is clearly growing, as theycontinue to fragment, Russell said.Some OEMs are moving to globallylicensable specifications, but overall,we not only see an increase in thecomplexity of our industry categoriesbut also in OEM specifications. In therecent past, only a few OEMs wereactive, but now almost all OEMs want toplay a part and have their own systemsand specifications which are oftenmutually exclusive.This requires the oil and additives
industry to be smarter about the pro-liferation of specifications, to satisfyboth the OEMs need for faster deliveryof new technologies and the lubricantblenders desire for differentiated, high-er value products.Another issue, he observed, is the
wide variety of API Group III base oilsavailable, complicating the grade slatethat confronts formulators. Not longago, the world had three merchants ofGroup III base oils: SK and S-Oil, bothin South Korea, and Finlands Neste Oil.Today, the list of Group III producers
includes Petronas, Petro-Canada,
tests, and the entire category cost near-ly 20 times as much to complete.
All this added complexity has thepotential to add significant cost to lubri-cant marketing and supply chain bud-gets, in addition to more expensivedevelopment programs, Russell said,rendering some programs of border-line commercial justification.Russell foresees real cost chal-
lenges ahead for the industry, as itstruggles to simultaneously create thenext generation of passenger car andheavy-duty engine oil upgrades.Meanwhile, additive companyresearch budgets reportedly are risingmore than 7 percent a year, he said,and huge capital expenditures areneeded to support emerging markets.Indeed, its a matter of public recordthat all four major additive companiesare expanding capacity in Asia.Russell continued, To be clear, this is
definitely not about lowering technicalhurdles but is about reducing the
amount of duplication,redundancy and wastedeffort.Looking at the current oil
development structures andprocesses, he said the indus-try should ask: Are thesemeeting our needs, movingquickly enough, and arethey indeed sustainable? Arethey creating value, versusadding unnecessary com-
plexity? My fear is that the balancecould tip towards complexity that does-nt create value.Drawing to a close, Russell suggest-
ed that the processes for developingnew specifications are ripe for reform.Those processes typically establishstandards via consensus, and are ledby trade associations. Infineum isboth committed to and supports suchbodies, he insisted. However, such
42 APRIL 2013
Continued on page 44
Trevor Russell
Lubricants demand is shifting and somust resources, says Trevor Russell.Pictured is Infineums Singapore plant,now undergoing a major expansion insalicylates capacity.
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processes now entail large numbers ofpeople, sometimes with unclear vot-ing rights and decision-making author-ity. Participants must continually findconsensus and also grapple with verytight timelines.In North America, with the slippage
of the GF-6 timelines and serious chal-lenges around meeting PC-11, Russellcautioned, we already see leadingindicators that the system needsreview and thats before we start toconsider the European challenge ofACEA 2014.Whats the alternative? We believe a
smaller, more streamlined systemfocused on delivering a baseline per-formance specification from whichindividual OEM specs can be built isworthy of detailed consideration, hesaid. Removing duplication forexample where the same basic perfor-mance criteria are assessed in multipletests would be a good start.Finally, he concluded, we must
ensure the interchange guidelines forviscosity modifiers, base oils and com-ponents are robust, current and fit forpurpose. Addressing these issues willallow a release of resources to sup-port and promote rapid innovation,which in turn will benefit all industrystakeholders and consumers.Afterward, Russell sat down with
LubesnGreases for an exclusiveinterview and to expand on the topicof complexity. He said that shiftingresources to growth markets doesnot mean Infineum plans to trim itsoperations elsewhere. The way Imlooking at it, moving resources tothe East in fact is already under way.The growth is in the East, but ourexisting markets in North Americaand northwest Europe still need tobe served. Our additives resourcesare in place there, and we dontmean to take those away. But wehave to meet geographic growth, andwe face technical challenges.What were seeking is to do things
more efficiently. Were seeingresources getting tied up in stuff that
44 APRIL 2013
Continued from page 42 doesnt add value. One possibleexample, he said, could be base oilinterchange and viscosity grade read-across guidelines, which determinethe testing regimes for many candi-date engine oils. Are these guidelinesrobust? Do they lead to too much test-ing? he pondered.As the London audience heard,
Russell sees the process for introduc-ing new engine oil categories asanother resource-sapping effort thatneeds fresh thought. We have seensome of the industry committeesgrow to where they are too large,unwieldy, and dont let the technicalwork progress.The standards-setting organiza-
tions, within each committee andspecification body, should have amandate to think about complexity,he suggested. They need to be opento having a dialogue, to asking is thefluid were creating relevant, to askingif another test is really needed. Forexample, do we really need to run sixengine tests to establish base oilinterchange, or could three tests besufficient?Within Infineum itself, simplification
is an ongoing goal, Russell said.Were always looking to at our busi-ness processes, our interactions, ourhardware, where we can use nimbleand lean manufacturing. Im proudthat our customers say were numberone in terms of supply reliability, andwere extremely conscious of whatgoes into that. It takes constant ques-tions: Should we expand a plant?reduce units? how to get the rightcapacity in the right places?Some listeners at the ICIS meeting
felt that Russells real goal in speak-ing was to justify the firm prices andmargins now seen for additives. Fora number of years we were not get-ting the returns needed for reinvest-ment in our business, Russellresponded. We are now able to rein-vest in leading edge technologies andmanufacturing facilities. I just hatespending resources on low value,duplicative or wasteful activities.
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It was February 18, 2013.
After months of rhetoricalbarbs and diplomatic inci-dents, Japan and Chinaappeared to be on the cuspof escalating their territorial
spat in the East China Sea toa more comprehensive andintractable conflict. A
Japanese fishing vessel waschased around the disputed
Senkaku/Diaoyu islands bythree Chinese surveillancevessels. According toreports, the commercial ves-
sels came within 60 metersof contact before a JapaneseCoast Guard ship cut
between the parties andstymied any potentialmishap.Luckily, there was no acci-
46 APRIL 2013
dent, and no navy presence
from either side. But thatwas the extent of the silverlining, as this opaque and
high-stakes game ofbrinkmanship continues toplay out between theworlds second and thirdbiggest economies.
U.S. Assistant Secretary ofState to Asia Kurt M.
Will China Rift Deter
I
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Campbell emphasized thispoint recently in a trip to the
region. On Feb. 26, he toldThe Australian newspaper,In four years as assistant
secretary Ive faced many dif-ficult diplomatic situations,but none more difficult thanthis. Ive rarely seen diplo-mats on both sides [Japan
and China] more white-
knuckled, and on both sides
the sense that no retreat orcompromise is possible.The good news is that the
economic integration andinterdependency of bothcountries means that Tokyoand Beijing have powerfulincentives to remain eco-
nomically warm even ifpolitically cold. Whether
nationalism, political jockey-ing and a dynamic securityenvironment hijack this rela-
tionship remains to be seen.However, it is clear that nei-ther side wants this end.LubesnGreases recently
discussed the bilateral eco-
nomic relationship withlubricant company officialsin Japan, and heard two key
47LUBESNGREASES
r Japans Lube Sellers?
BY J. BERKSHIRE MILLER
Protesters in China (left) andJapan (right) rally againsteach others country. News -com photos: Feature China (l);Rodrigo Reyes Marin/AFLO (r)
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research from the KlineGroup, Chinas lubricantsmarket is cornered bynational companiesPetrochina and Sinopec,which in 2011 held 21 per-cent and 19 percent shares,respectively. The leadingforeign investors includeShell (7 percent), Exxon -Mobil (5 percent) and BPGlobal (3 percent).Japanese petroleum compa-nies such as JX NipponEnergy, Idemitsu Kosan andMitsui Chemicals all haveshares under 3 percent.Despite this, China contin-
ues to be a target forJapanese petroleum compa-nies because of the cheaperoperating costs and sus-
points: First, corporateJapan (not just the petrole-um industry) is extremelynervous about the potentialfor a greater strain in theSino-Japanese relationship.And second, most Japan-based lubricant companieshave no intention at leaststated to abandon theChinese market or evenreduce investments there. Atleast for now the opportuni-ties in China outweigh thepolitical risk.
Demand Still RulesThe Chinese lubricant mar-ket remains dominated bydomestic and non-Japaneseforeign companies.According to industry
tained levels o