The Right Tool for the Job Base stock optimization to help minimize cost and complexity X B Cox February 21, 2012
Use the right tool for the job Different tools for different purposes Using the right tool makes a job more efficient, safer and gives a higher quality result 2
Or the right vehicle Different vehicles for different purposes Each one has different lubricant requirements Lubricants require different base stock characteristics 3
Base stock choices Period of unprecedented change New capacity Rationalization New players Changing supply routes Increasing lubricant performance requirements Stay the course, or change base stock supply strategies? When? How much? 4
Lubes Value Chain Base oils ~50% - 75% of direct cost Also impacts: Inbound freight Additive technology Storage and handling Smart base stock choice improves your bottom line Minimizes complexity Reduces costs Maximizes return on investments Tankage and logistics Formulation cost * ExxonMobil assessment of typical cost distribution for example products blended in a medium sized European blend plant with waterborne access 5
How to select your base stocks Identify limiting technical requirements Sufficient viscosity range for all lubricants Formulations/addpacks available High VI corrector fluid for top tier engine oils Maximize cost effectiveness Minimize number of stocks, tankage Leverage existing product formulations Base stock slates for BOI / VGRA Assess supplier capability Local / regional supply Compatible logistics Reliability Consistent quality Supplier committed to base stocks Consider global / pan-regional suppliers 6
Engine Oils Frame the Dialog Automotive ~ half total lubricant volume Harmonized engine oil specifications API/ILSAC ATIEL OEM s Rapid pace of change Categories Viscosity Grades Increasing performance requirements Demanding higher VI base stocks Often set limiting base stock qualities *Source: ExxonMobil assessment of publicly available information 7
Other Lubricants Equally Important Almost half of the market Specifications not harmonized OEM specific requirements Updates seldom regulatory driven Diverse performance requirements Wide viscosity range Solvency can be important Many applications cost-sensitive Synthetic market small but growing Value conventional base stocks in many applications *Source: ExxonMobil assessment of publicly available information 8
Group I / II Widest Application ExxonMobil: Majority of lubricant applications can be blended with Group I or Group II Role of Group III limited to high VI, light viscosity applications Source: Brent Lok, ICIS Middle East Conference, Dubai, October 2012, used with permission of the author. 9
Lubricants to Base stock Demand Marine and some Industrial formulations prefer Group I Premium PVL / CVL moving to Group II / II+ /III Very limited use of Group III+ or PAO Majority of applications can use either Group I or Group II Pace of change is expected to be consistent but slow *Source: ExxonMobil assessment of publicly available information 10
VI and Viscosity are important ExxonMobil Group II/II+/III cover most engine oil viscosity grades 0W30 and lighter need Group III and III+/PAO Corrector stocks may be needed for performance Heavier lubricants require brightstock or PIB Source: Brent Lok, ICIS Middle East Conference, Dubai, October 2012, used with permission of the author. 11
Illustration: Base Stocks Slate Approved Base Oil Interchange (BOI) within the slate allows different base stock viscosity grades to blend the base oil for a given formulation Slate Engine Oil Product EHC TM 45 EHC TM 50 EHC TM 65 EHC TM 110 10W-30 10W-30 10W-30 Same Product, Different Base Stock Mix, No Extra Engine testing Source: Charles Baker, ExxonMobil Research & Engineering, 5 th Asia-Pacific Base Oil Conference, March 2011 12
Illustration: Base Stocks Slate Approved Viscosity Grade Read Across (VGRA) within the slate allows blending a range of viscosity grades Slate + additives = Engine Oil Product EHC TM 45 EHC TM 50 EHC TM 65 EHC TM 110 5W-30 10W-30 15W-40 20W-50 Engine Testing Typically Reads in One Direction Different Products, Different Base Stock Mix, No Extra Engine testing Source: Charles Baker, ExxonMobil Research & Engineering, 5 th Asia-Pacific Base Oil Conference, March 2011 13
Base stock Viscosity Range* *ExxonMobil assessment of publically available data; Estimated typical industry average refinery yield by viscosity. 14
Group II / II+ Value into Engine Oils Example - N EHC Am Engine 45/65 Oil Blend Coverage Coverage* Grp II/II+/III 2015 Relative Volume Gp III EHC 110 EHC 65 EHC 45 0W 5W-Dx 5W 10W 20W. 5W 10W 15W Mono PVL CVL Key: Use base stocks designed to cover the limiting requirements Broad viscosity coverage Group II / II+ slate allows read-across Limits the amount of more expensive Group III required *Source: ExxonMobil assessment of publicly available information 15
Industrial Oil Blend Coverage Group I slate covers full range of industrial oil viscosities Wide-vis Group II slate can cover up to ~80% of industrial oil Group I Brightstock also required Base stock choice depends on: Base stocks used in other products Blend plant tankage Size of indoil business Existing indoil product approvals Specific performance requirements *Source: ExxonMobil assessment of publicly available information. Relative volumes are for North America 16
Solutions Tailored to Your Business Each market is different * Product demand mix Product performance categories Viscosity grade mix Base stock availability * Logistics and distribution modes Base stock solutions unique to your situation Industry trends don t always align with individual company needs *Source: ExxonMobil assessment of publicly available information 17
Base Stock Strategic Approach Group I: Base load to economic maximum; Work with supplier to evaluate long-term supply security Group II: Work with supplier on when/how to increase Grp II use, to ensure reliable supply, minimize conversion costs Group III: Limited volumes can be used as volatility / ccs trim stock and for low viscosity engine oils Group IV (PAO): Secure long-term supply as needed 18
Conclusions Period of unprecedented change in the base stocks business Base stocks are important part of lubricant value chain Base stock selection should be a long-term, conscious decision Decision involves more than cost or newest products One size does not fit all Involve your base stock supplier in strategic discussions Use the right tool for the job. Group I has a long and useful life, and suitable for most applications Group II growing in availability and use Group III oversupply with limited applications PAO continues an important niche product for synthetic performance 19
Group II growing in availability and use EM changes mirror industry trends Growing Group II Reducing Group I EM: building on our strengths Growing economic capacity Improving operations Leveraging new technology Optimizing the network Balancing viscosity mix Broadening raw material selection Aligning slates for the future *Source: ExxonMobil assessment of publicly available information 20