Lubes & Greases April 2013

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Last call forDex/Merc?

A P R I L 2 0 1 3 V O L . 1 9 I S S U E 4

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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

George Gill, Tom Glenn, Jack Goodhue,Carolyn L. Green, Boris Kamchev, David McFall, J. Berkshire Miller, Tim Sullivan, Steve Swedberg Contributors

Gloria Steinberg BriskinManaging Director/Vice President, AdvertisingPhone: (703) 536-7676

(800) [email protected]

Megan Matchett Account [email protected]

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.

Subscriptions to the print edition are free to qualifiedsubscribers in the United States and Canada who areactive in the lubricants industry as man ufacturers, marketers, volume buyers and users, or as supplierswho maintain close ties to the lubricants industry.Qualification is subject to publishers approval.

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Lubes nGreases is a registered trademark of LNG Publishing Company, Inc.2002 FolioShow Editorial

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!

Nancy J. [email protected]

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-

tions and creative teams who put theseeffective ads together. We send the com-plete scores to every advertiser in the sur-veyed issue, so they can compare theirperformance with other studied ads, to dis-cover ways to communicate more effec-tively with our readers.

And the Winners Are ...

Lisa Tocci, Nancy DeMarco & Gloria Steinberg Briskin

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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Call 800.527.3236 or visit http://baseoil.phillips66.com

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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


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


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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


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


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


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


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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


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


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


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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

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

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


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

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)

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

Documents

Lubes & Greases April 2013