Fuels & Lubes International - Q3 2011 by F+L Asia

Quarter Three 2011 Volume 17 Issue 3

I N T E R N A T I O N A L CONSUMER PRODUC TS

BIOFUELS

COSME T ICS

LUBRIC ANTS

AMYRIS: P O LY M E R S

FL AVO R S

Leveraging sugar all the way to the end product Farnesene: Elegant in its simplicity

FRAGRANCES

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© 2011. Chevron Oronite Company LLC. All rights reserved. The Chevron hallmark is a registered trademark of Chevron Corporation. Oronite is a registered trademark and Making the things that go, go better is a trademark of Chevron Oronite Company LLC.

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Editor’s Corner The exciting world of renewables OUR COVER STORY IS ABOUT AMYRIS INC., A U.S. BIOTECHNOLOGY company that will soon commercialize a different breed of base oil, one that is derived from sugar cane and therefore renewable, with properties similar to petroleum-derived Group III base oils. Vice President for Lubricants Jeff Brown said Amyris’ product will redefine performance in the base oil industry. Amyris and Cosan announced in June that they are close to starting up Novvi S.A., a company that was established in Although the company’s Brazil to produce and commercialize renewable base oils made initial production volumes from Biofene®, Amyris’ renewable farnesene, worldwide. are small compared to Shell’s combined one Interestingly, Amyris’ joint venture partner Cosan, the third million-ton-per-annum largest lubricants manufacturer in Brazil (the company acquired capacity from Phase 1 Esso’s business in 2008), also has a biofuels joint venture with and 2 of Pearl GTL in Shell in Brazil. Called Raizen, the joint venture is the world’s Qatar, Amyris does have global ambitions. largest producer of sugar and ethanol from sugarcane. Vicky Villena-Denton Another interesting fact is that Amyris will enter the base oil Editor-in-Chief & Publisher market at about the same time as Shell’s gas-to-liquids (GTL) base oil. Although the company’s initial production volumes are small compared to Shell’s combined one million-ton-per-annum capacity from Phase 1 and 2 of Pearl GTL in Qatar, Amyris does have global ambitions. With today’s crude oil prices, Brown says Amyris’ renewable base oil is also price competitive. Recently, the company also announced plans to partner with Singapore-based Wilmar International Ltd. to develop and commercialize a family of surfactants derived from Biofene for use in a range of products, including consumer packaged goods, personal care products and industrial applications. These surfactants are expected to be effective substitutes for nonylphenol ethoxylates (NPEs), the use of which is currently being phased out or severely restricted by regulatory agencies around the world due to health and environmental concerns, according to Amyris. Watch this space for further news on these exciting developments. FLW, our weekly newsletter, and Oiltrends, our monthly, will keep you updated as well. Visit our website to subscribe!

F U E L S & L U B E S I N T E R N AT I O N A L

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CONTENTS

Columns 6

Features

AMYRIS:

Leveraging sugar all the way to the end product

F U E L S & L U B E S I N T E R N AT I O N A L

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Formaldehyde regulation that seeks to protect U.S workers may end up hurting them instead. . . . . . . . . . . . . . . Amyris: Leveraging sugar all the way to the end product . . . . . . . . . . . . . . . . . Farnesene: Elegant in its simplicity . . China misses fuel quality targets . . . . EUâ&#x20AC;&#x2122;s universal fuel approach may present huge challenge for OEMs . . . . LA sets another first . . . . . . . . . . . . . . . How product lifecycle management can help your business . . . . . . . . . . . . . Energy seen as most promising segment for industrial lubricants . . . .

16 22 24 26 30 32 36 40

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40 ENERGY SEEN AS MOST PROMISING SEGMENT FOR INDUSTRIAL LUBRICANTS

Hank Hogan is an Austin, Texas-based freelancer who writes about business, energy, technology and science. Like others in Texas, he’s sold exploration rights to an independent but a gusher hasn’t come in yet.

Kelly Thornton is a freelance writer based in San Diego, Calif. She was a staff writer for 18 years at the San Diego Union-Tribune, covering law enforcement and legal affairs.

Jonathan Yates is the author of more than 100 articles that have appeared under his byline in Newsweek, Foreign Policy and The Washington Post, among other publications. He is the holder of degrees from Harvard University, The Johns Hopkins University and Georgetown University Law Center.

Jeroen Looye spent seven years as a base oil trader for AP Chemicals in Belgium. He is now an entrepreneur based in The Netherlands and is director of the Dutch company Losiwo B.V. that launched the base oil platform, www.baseoilmarket.com, in 2008.

PRODUC T

Contributors

Cristine Villena Amurao, MD, MPH completed her medical degree and residency program in dermatology at the University of the Philippines College of Medicine-Philippine General Hospital. She received her masters degree in public health, with a concentration on environmental and occupational health, from the Northwest Ohio Consortium for Public Health.

LIFEC YCLE

HOW MANAGEMENT

can help your business

by Hank Hogan

32 F U E L S & L U B E S I N T E R N AT I O N A L

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BASE OIL COLUMN

I L LU S T R AT I O N BY C H I L I D O G S

Downward pressure in the Asian market

In the beginning of the second quarter, Asian base oil prices rose significantly due to strong demand and tight supply. Scheduled turnarounds of refineries in South Korea, Singapore and Japan restrained supply. Group I SN150 was scarce in South East Asia.

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

Ma Ma

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

FOB Asia

FOB Middle East

FOB Baltic

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

$1400 $1300 $1200 $1400 $1100 $1300 $1000 $1200 $900 $1100 $800 $1000

$900 $800 $1400 $1300 $1200 $1400 $1100 $1300 $1000 $1200 $900 $1100 $800 $1000 $900 $800

FOB Middle East

FOB Baltic

2010 Base oil BS150 prices ($/MT)

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

$1100 $1000

FOB Asia

FOB Europe

FOB Asia

FOB Middle East

FOB Baltic

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

2010 Base oil BS150 prices ($/MT)

FOB Europe

FOB Asia

FOB Middle East

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

2010 Base oil SN500 prices ($/MT)

FOB Europe

FOB Asia

FOB Middle East

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

2010 Base oil SN500 prices ($/MT)

CFR NE Asia

CFR India

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

2010 Base oil SN150 prices ($/MT) CFR NE Asia

CFR India

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

2010 Base oil SN150 prices ($/MT)

CFR NE Asia

CFR India

2010 Base oil BS150 prices ($/MT) CFR NE Asia

CFR India

2010 Base oil BS150 prices ($/MT)

CFR NE Asia

CFR India

S O U R C E : W W W. B A S E O I L M A R K E T. CO M

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“Changing Course” continued on page 14>> ..........................................................................

FOB Europe

$1600 $1500 $1400 $1600 $1300 $1500 $1200 $1400 $1100 $1300 $1000 $1200

$1600 $1500 $1400 $1600 $1300 $1500 $1200 $1400 $1100 $1300 $1000 $1200 $1100 $1000

FOB Baltic

2010 Base oil SN150 prices ($/MT)

Shortage of bright stock caused prices to rise further in all regions. However, Group I and Group II prices finally stopped rising by the first half of June. Still, Group III producers were eyeing for higher prices. One month after the arbitrage window between the West and the East closed in the middle of April, Chinese and Indian surplus cargoes started to appear for export.

FOB Middle East

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

DURING THE SECOND QUARTER, WHICH IS THE FIRST peak season of the year for lubricants, tight supply and high demand pushed base oil prices up by US$130-320 per metric ton (MT) worldwide. The trigger, in addition to the usual market mechanisms, was the Arab uprising in countries such as Tunisia, Libya, Egypt and Yemen, which caused crude oil prices to soar. The military action of the North Atlantic Treaty Organization or NATO against the Gaddafi regime had a strong impact as Libya is responsible for about 4% of global oil production. The unrest in other countries in the region added to the risk premium in crude oil prices.

FOB Europe

Course Course

FOB Asia

2010 Base oil SN150 prices ($/MT)

y Jun Jul Au g Se p Oc t No v De c Jan Fe b Ma r Ap r Ma y

Changing Changing by Jeroen Looye

FOB Europe

by Jeroen Looye

2010 Base oil SN500 prices ($/MT)

$1400 $1300 $1200 $1400 $1100 $1300 $1000 $1200 $900 $1100 $800 $1000 $900 $800

2010 Base oil SN500 prices ($/MT)

$1400 $1300 $1200 $1400 $1100 $1300 $1000 $1200 $900 $1100 $800 $1000 $900 $800

CFR NE Asia

F U E L S & L U B E S I N T E R N AT I O N A L

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CFR India

S O U R C E : W W W. B A S E O I L M A R K E T. CO M

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AUTOMOTIVE COLUMN

Harmonization:

Sooner rather than Later?

There is a possibility of harmonization [of oil specifications] in the future,â&#x20AC;? said Takumaru Sagawa, chairman of the oil committee for the Japan Automobile Manufacturers Association (JAMA), at the 17th Annual Fuels & Lubes Asia Conference in Singapore in March. >> Sagawa

F U E L S & L U B E S I N T E R N AT I O N A L

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AMA is a member of the International Lubricant Standardization and Approval Committee (ILSAC), an organization that also counts American vehicle manufacturers among its members. Sagawa works for Nissan Motor Co. as manager of the vehicle materials project group in Yokohama, Japan. The possibility of harmonization arises from the need to avoid going over a cliff created by the advent of new technology. There’s a looming need for new engine tests, as parts for some ILSAC GF-5 engine tests are going to run out as early as 2012, others by 2015. Meanwhile, in Europe, the European Automobile Manufacturers’ Association (ACEA) is working on a number of new test sequences, according to Adam Opel’s Thomas Hickl, who spoke at the UNITI Mineral Oil Technology Congress in Stuttgart, Germany, in April. Hickl is a member of the ACEA working group on fuels and lubricants. The driver for the ACEA effort is the increasing use of biofuels. Biofuels present new challenges in terms of corrosion from trace contaminants and cold startability, as well as sludge and piston cleanliness. With usage perhaps doubling by 2020 in Europe, new tests have to be created and implemented soon. For its part, ILSAC is also looking into new test sequences. James Linden, former ILSAC chairman, noted that the Sequence IIIG, IVA, VG, and VID tests that are part of the current ILSAC GF-5 specification will all need to be replaced or updated. Linden consults for Japan’s Toyota Motor Corp. Developing new tests can be a lengthy and expensive process. Because some of the parts to run current tests will disappear by 2015, ILSAC needs to start new test development as soon as possible, Linden told the Singapore conference. With limited resources available from both sides of the Atlantic and the Pacific, it makes sense to consolidate resources, i.e., test development and, perhaps eventually, lubricant specifications. The first is already actively being considered. “We just started discussions about potential cooperation with regards to development of engine tests with API [the American Petroleum Institute] and ILSAC in order to gain from the engine tests that we all need,” Hickl said.

Common tests could be the first step to a global lubricant specification. ACEA specifications cover both gasoline and diesel engines, while those of ILSAC only cover the former. The tests and specs, then, must only deal with gasoline engines, which are being downsized for fuel economy reasons. Driven by customers’ desire to save on fuel, Hickl said the trend to downsize engines is industry-wide. For instance, the Volkswagen Golf has reduced its engine size from 1.8 to 1.4 liters from 1996 to 2010, while boosting torque. Meanwhile, in 1996 maximum speed was only 178 kilometers per hour (km/h) with fuel consumption at 8.0 liters per 100 km (l/100 km) compared to 2010 at 220 km/h and 6.3 l/100 km, respectively. In addition, oil drain interval has doubled between 1996 and 2010, from one year or 15,000 km to two years or 30,000 km. These hardware developments are reasons why engine tests are changing constantly. Generally, original equipment manufacturers (OEMs) prefer using enginebased tests for oil approvals. These tests have to be run on OEM-specific hardware. In the case of ACEA, the current engine tests include those from Peugeot Citroën, Mercedes Benz, Volkswagen and Ford. The ACEA list is predominantly European. One exception is the Sequence VG low-

“We just started discussions about potential cooperation with regards to development of engine tests with API and ILSAC in order to gain from the engine tests that we all need.” temperature sludge test, which uses a Ford engine and is shared by ACEA 2010 and ILSAC GF-5. In addition to Ford, GF-5 certification uses engines from General Motors, Nissan and Cadillac. Again, the list reflects the composition of the governing body. Coming up with common tests will require settling on a common and available hardware. Speaking Hickl

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of hardware, neitherACEA nor ILSAC tests include engines from a Korean, Chinese or Indian OEM. Korean OEMs have developed the largest worldwide footprint among the three. To date, Korean OEMs have mostly adopted the API/ILSAC spec for their North American products and the ACEA spec for their European offerings. Since it takes years to devise a set of tests, it might be time to consider hardware from these emerging OEMs. However, as Hickl pointed out, many OEMs have their own in-house specifications. Mercedes Benz, for example, has its own in-house low-ash oil specification. It differs from ACEA 2008, on which it is based, in allowable evaporative loss, viscosity at high temperature and high shear rates and sulfur content by weight, as well as allowable chlorine by weight, which are not defined in the ACEA spec. In the case of Opel, which is a subsidiary of GM, the carmaker has adopted GM’s worldwide dexos™ specs. “We did already finalize this global harmonization two years ago. With dexos1 we have a gasoline limited engine oil spec and dexos2 covers full global gasoline and diesel performance,”said Michael Seemann,

design release engineer for engine oil, oil filters and service data at Opel. For those who don’t want to, or can’t, use the dexos specification, there is another factor to consider in the development of a global standard. There is an increasing number of hybrids and other rapid engine cycle technologies on the road today, a usage scenario older cars and engine oils never encounter. Older vehicles do not have the same performance requirements for engine oils as newer ones do. New engine tests are needed to cover new hardware, Linden said. The economics of the situation works against a drop-in replacement approach. Simply extending existing engine tests won’t work either because engine parts for these tests are soon to run out. “If we only replace those four tests and then try to establish equivalency between the new tests and the old tests and keep the same requirements as GF-5, that probably will be as difficult as implementing a new category,” said Linden. Thus, a real opportunity to devise a common set of engine tests for some, if not all, engine oil properties for both ACEA and ILSAC exists in the near future.

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>> “Changing Course...” continued from page 6 ..................................................................................

Traders could not offer prices, since supply was not available. By the end of April, offered prices for SN150 had increased by US$150/ MT on FOB South East Asia basis. The base oil market stayed relatively quiet, as blenders preferred to consume inventories instead of stocking up. But sellers’ expectations were even higher, such that they quoted US$5090/MT more than March prices. However, buyers were afraid to bid at these price levels. In early April, a major Indian producer failed to award a tender for 12,000 MT of Bright Stock for arrival before the first quarter of 2012 because sellers were not willing to make a term contract, in light of the current price volatility.

In May, as domestic supply improved and lubricants sales began to weaken, key base oil buyers in China and India held off in the face of high prices and sufficient domestic inventories. Base oil markets faced downward pressure, while suppliers maintained high offer prices due to low availability of products in the cargo market. Although the refiners’ maintenance shut downs in Asia and Europe had tightened the cargo market significantly, weak lubricant demand and fear of a sudden price drop convinced buyers to hold off their purchases. By the end of May, Asian blenders started to benefit from falling domestic prices while traders with high inventories were trying to sell their products by offering discounts. More surplus cargoes are reported to be earmarked for export or re-export. Asian key buyers have changed their role and have become sellers of base oil. A Chinese refiner offered two surplus cargoes of N150, with a total quantity of 4,0004,800 MT at US$1,500/MT CFR Singapore for loading in early June. Three refiners, the Sinopec

Gaoqiao plant, the Hainan Handi Yangguang Petrochemical plant and the CNOOC Huizhou plant, offered spot supplies of Group II; thus, these products were in sufficient supply in China. More export cargoes can therefore be expected in June and July. In the Indian Group II market, it was rumoured that spot supply from the major Indian producer Hindustan Petroleum Corp. Ltd. (HPCL) is not certain since the start of commercial operations of its new Group II facilities might be delayed. The spot supply was expected for June. The refiner has the capacity to produce 200,000 MT/year of Group II. With demand weakening, Group II base oil prices in India remained firm in June. In May, major Chinese base oil producer Sinopec released 23,000 MT of base oil in the spot market, 300% more than in April. In India, sufficient supply of locally made material also challenged the more expensive, imported base oils. High priced Iranian products were ignored in Asian ports, which forced Iranian producers to lower their quotes by the end of May. According to BaseOilMarket.com, by the beginning of June, average base oil prices in North East Asia were at US$1,320/MT for SN150, US$1,400/MT for SN500 and $1,655/ MT for Bright Stock on CFR basis. All grades were US$120/MT higher than in the beginning of April. Uptrend in Europe Scheduled turnarounds of refineries in Russia, Spain, Poland, Portugal, Ukraine, Belarus and Italy caused a tightness in supply in Europe in the second quarter. By the second week of June, Group I base oil prices in the European export market rose by US$200-320/MT, while Group III prices rose €145 to €160/MT (US$208-231) since April. Strong demand and

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thin supply pushed European base oil prices so high that Europe lost ground to exports. Traders noted that SN150 was in very short supply in Europe, which drove SN150 prices significantly higher. According to BaseOilMarket.com, SN150 FOB domestic North West Europe price rose 19% since April. Despite higher offers, European buyers accepted these prices. Premiums of US$50-90/MT to the BOM Index Europe export levels were quoted, but even then, sellers could not secure spot supply. Traders said that high domestic demand during the planting season in Russia and NIS countries have soaked up the base oil output of local refineries; therefore, export supplies in the Baltic Sea and Black Sea regions were tight. In the first week of May, Russian base oil prices jumped US$70-75/MT and remained firm until June. These prices were considered too high, but limited supply in the Baltic and Black Sea ports kept markets firm. A buyer from West Africa finalized a 10,000 MT deal for SN150 and SN500 with a Russian seller at US$1,3801,420/MT on FOB Baltic Sea basis. During the first five months of the year, Turkish buyers were very active in the Black Sea market. By June, high inventories in Turkey kept buyers in a comfortable position to stand by the sidelines when prices peaked. In early June, FOB Black Sea prices averaged US$1,375/MT for SN150 and US$1,380/ MT for SN500, which are US$255-260/MT higher than April prices. Buyers believe that base oil supply will increase in July, as refinery turnarounds are completed in continental Europe. Therefore, Russian and NIS material should face downward price pressures in the coming months. Rosneft, the major Russian producer, finished maintenance in two refineries at the end of May. After a two-month turnaround, the refiner is expected to produce more base oils by the end of June. Some traders said demand from West and East Africa is very strong and they have sold out all their stocks until June or July. They asked their clients to order base oils for August delivery at FOB Black Sea for US$1,300/MT. Bright Stock is very scarce in Europe. In the middle of May, an Egyptian state-owned refinery issued a tender for 12,500 MT of Bright Stock, after a Bright Stock tender of similar quantity was awarded in the beginning of May. Some European traders were looking for supply sources to bid for this tender, but could not find supply. The roles seem to have changed these last couple of months. Today, there is downward pressure in Asia and an upward trend in Europe, mainly caused by the unrest in the Middle East. The first signs of a coming price correction can be seen as oil and gas prices have dropped somewhat and major importers like China, India and Turkey are trying to export excess products. The risks for base oil prices in the short term are most likely skewed to the downside.

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Formaldehyde regulation that seeks to protect U.S. workers may end up hurting them instead by Cristine Villena Amurao

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I L LU S T R AT I O N BY C H I L I D O G S

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FE AT U R E

Miller, who is based in Spartanburg, South Carolina, said FORMALDEHYDE AND ITS DERIVATIVES ARE USED metalworking fluid formulators will probably have 12 months to in an array of different products in disparate industries, including supply products at the current treat rate of 1,500 PPM and end users metalworking as a preservative, as well as in the cosmetic and beauty will have 12 months to use HHT at the 1,500 PPM level. industry. Most people are familiar with the use of formaldehyde in The provision on labeling changes is not very clear. The RED embalming and tissue preservation, but it is also used as a disinfectant document states that “conditions for the distribution and sale of in hospitals, as a preservative in make-up, as an adhesive in making products bearing old labels will be established when the label changes plywood and particle board furniture. It is used in some laser are approved. However, specific existing stocks time frame will be toner powders and in cigarettes. You might not see formaldehyde on established case-by-case, depending on the number of products the list of active ingredients in some of those products, but it might involved, the number of label changes, and other factors.” be present in a different form. The EPA has not given a definitive time-frame for the It is also an interesting fact that everyone naturally produces implementation of its mitigation measures and labeling changes. formaldehyde. It doesn’t matter how clean our surroundings are or This stems partly from the severe critique by the National Academy how healthy we are, we will breathe out and excrete (in our urine) of Sciences (NAS) of the EPA 2010 Integrated Risk Information a small amount of formaldehyde. So, if you are smoking and using System or IRIS assessment on formaldehyde. The NAS criticism an old laser printer in a newly painted room, you have just inhaled is particularly noteworthy because EPA itself asked for the NAS, higher than normal amounts of formaldehyde! through the National Research Council (NRC), to conduct an Different industries may use different formaldehyde-releasing independent review of its draft IRIS report on formaldehyde. A prepreservatives. One such chemical used in metalworking fluids is publication copy of the NAS review was released in April 2011. Hexahydro-1,3,5-tris (2-hydroxyethyl)-s-triazine (HHT). As such, This is significant because EPA rulemaking, such as the RED there are more than 30 agencies in the United States alone trying on HHT, is influenced by IRIS reports. Adrian Krygsman, director, to influence or regulate formaldehyde and formaldehyde release product registration for Florham Park, bactericides. These include the U.S. New Jersey-based Troy Corp. and a Environmental Protection Agency (EPA), co-author of the STLE presentation, has the Occupational Safety and Health “HHT is supposed to proposed a meeting of all formaldehyde Administration (OSHA), the National keep levels of bacteria in condensate biocide registrants with the Cancer Institute (NCI) and the National metalworking fluids low, but EPA this summer. Until this is settled, no Toxicology Program (NTP). if under treated, endotoxinchange in labeling will be required. In April 2008, the EPA published a The “science” used behind the notice in the Federal Register (FR) asking producing bacteria will thrive regulation of formaldehyde may have been for comments on its risk assessment of in the fluid. The endotoxins politically motivated and flawed, experts HHT. This allowed all stakeholders to give will be released in the air say. In 2004, the International Agency their inputs before the agency decides to as the machines using the Research on Cancer (IARC) reclassified allow or to discontinue the use of HHT formaldehyde as a Group 1 substance, in different products and industries. The fluids are operated and with sufficient evidence in humans for EPA then issued its decision called the inhaled by workers. In effect, carcinogenicity based largely on a single Reregistration Eligibility Decision (RED) the regulation that seeks to study. It was previously classified as a on June 27, 2008. Based on this RED, protect workers may end up Group 2A substance, probably carcinogenic HHT can no longer be used in paints, to humans with limited evidence in hurting them instead.” stains, coatings, institutional and household humans for carcinogenicity and sufficient cleaning products. Although the EPA evidence in animals. allowed the reregistration of HHT for use Following IARC’s lead, the NTP published a draft of the in metalworking fluids, certain mitigation measures and label changes 12th Report on Carcinogens (RoC) in 2010 and recommended need to be undertaken by the registrants. These changes will have a great that formaldehyde be listed as known to be a human carcinogen. impact on the industry and may have some unintended consequences. It is currently listed as reasonably anticipated to be a human carcinogen The biggest change is the drastic reduction of the treat rate for “based on limited evidence of carcinogenicity in humans and HHT. Due to the potential inhalation exposure of workers handling sufficient evidence of carcinogenicity in experimental animals” in metalworking fluids, the EPA reduced the maximum application the 11th RoC. It was the addition of lymphohematopoeitic cancer rate of HHT from 1,600 parts per million (PPM) to 500 PPM. and leukemia to this draft paper that has caused the most recent “However, decreasing the treat rate of HHT to 500 PPM as active regulatory turmoil. ingredient is not effective and may cause more harm than good Gary Marsh, director of the Center for Occupational Biostatistics because under treatment will allow a build-up of endotoxins in the and Epidemiology of the University of Pittsburgh in Pittsburgh, workers,” according to Philip Miller, global compliance manager, Pennsylvania, has submitted comments to the NTP’s RoC Center, metalworking additives at Wickliffe, Ohio-based Lubrizol Corp. questioning the omission of his publications that would have Perhaps indicative of the acute interest in formaldehyde contradicted the Expert Panel Report. He stated that attributing the regulations, Miller spoke before a standing-room audience at the workers’ nasopharyngeal cancers (NPCs) to formaldehyde exposure Annual Meeting of the Society of Tribologists and Lubrication was based on “anomalous findings in one study plant.” The higher Engineers (STLE) in Atlanta, Georgia, in May. than expected number of deaths due to NPCs in plant one may not HHT is supposed to keep levels of bacteria in metalworking be due to formaldehyde exposure, but due to the worker’s exposure to fluids low, but if under treated, endotoxin-producing bacteria will sulfuric acid mists, mineral acid, metal dusts and heat, in the ferrous thrive in the fluid. The endotoxins will be released in the air as the and nonferrous metal industries. His written and oral arguments, machines using the fluids are operated and inhaled by workers. presented at the 2009 NTP meeting, were essentially dismissed. In effect, the regulation that seeks to protect workers may end up According to Marsh, formaldehyde should not be reclassified hurting them instead.

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from its current listing as reasonably anticipated to be a human carcinogen. The EPA IRIS report and the draft 12th RoC report on formaldehyde lump together different kinds of blood and bone marrow cancers into several big groups, namely “lymphohematopoietic cancers and leukemias,” when it should be looked into individually as not all cancers are alike and they develop in different ways. Conclusions on causality need to be more focused and specific. The Zhang et al, 2007 study, which linked formaldehyde to myeloid leukemia concluded that exposure to formaldehyde in a plant in China caused an increase in the incidence of myeloid leukemia, “remarkably similar to exposure to benzene.” This plant was later found to be highly contaminated with benzene. Studies at the University of North Carolina by Jim Swenberg show that no 13-labeled carbon (a marker used in the study for easy traceability) formaldehyde introduced by inhalation reaches the bone marrow. This implies that even if a worker inhales formaldehyde, there is no direct effect on the bone marrow. A later study done by Zhang et al, in 2009 in formaldehyde melamine resin factories in Guangdong province acknowledged that exposure levels in China are above the permissible exposure levels in the

United States. The authors stated that, “the subjects in our study were highly exposed and may explain why we were able to see hematotoxic effects in a relatively small population.” This meant a decrease in bone marrow cells, from which white blood cells come from. White blood cells help us fight infections. They suggested further studies with larger sample sizes and lower exposure levels, to see if similar results will still be seen. Dose and exposure levels are significant factors in the development of some cancers. These conflicting studies and interpretations have caused confusion and concern within the metalworking industry. The EPA will continue using old exposure data until new data are available. The agency is already asking for confirmatory data, such as chronic toxicity and carcinogenicity (rat and mouse) data for HHT and will probably require increasingly expensive hazard data. It is possible to influence future regulations, as registrants may request the

“The science used behind the regulation of formaldehyde may have been politically motivated and flawed, experts say.”

EPA to remove or reduce certain restrictions or mitigation measures upon submission of acceptable toxicity and exposure studies that demonstrate risk to HHT is below the Office of Pesticide Program’s (OPP) level of concern. But stakeholders in the metalworking industry need to provide relevant data. This can be done by helping enlist sites for exposure monitoring and helping recruit machine shop volunteers for an exposure study. The American Chemistry Council (ACC) program has funding from 44 of its member companies for 19 observational exposure studies. This program is being closely coordinated with the EPA and will cost between US$20 to $25 million. The metalworking study alone is estimated to cost between US$1.0 to $1.5 million. Looking ahead, attrition of formaldehyde and formaldehyde-releasing biocides is a good possibility if poor science continues to prevail. More REDs are coming in the near future that will involve other chemicals used in the metalworking industry. There are alternatives to HHT, but each chemical has its own pros and cons. Bringing a new biocide into the market may cost an estimated US$10 million, but companies are sure to hesitate in this regulatory climate, not only in the United States, but in Europe as well. Although going formaldehyde-free is an option, it might not be the solution.

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AMYRIS:

Leveraging sugar all the way to the end product by Jonathan Yates

OMMENTING ON THE allied victory in World War II, former Russian dictator Joseph Stalin declared that it was, “decided by engines and octane.” A future victor might make the same observation about a conflict yet to be fought, except that it was, “won by biofuels and renewable energy.” The preparations for this were witnessed at the 2011 Air Show at Andrews Air Force Base in Maryland,

where two of the Thunderbirds, the aerial stunt team of the United States Air Force (USAF), were powered by a biofuel blended from camelina flowers. By 2013, the goal of the USAF is to have all of its planes certified for biofuel use. Located across the country from Andrews Air Force Base, home of Air Force One, is Amyris, Inc., headquartered in Emeryville, Calif., just outside of San Francisco. Amyris, trading on the

NASDAQ under the symbol AMRS, is an integrated renewable products company. Founded in 2003 by colleagues from the University of California, Berkeley, and capitalized to date with US$400 million in funding from grants, private equity and investor financing, Amyris provides sustainable alternatives to a broad range of petroleum-sourced products. Amyris was initially funded by a grant from The Bill and Melinda Gates

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Foundation to the Institute for OneWorld Health to develop the technology for a steady supply of artemesinin, a low-cost, anti-malarial drug. After successfully developing the technology, Amyris granted a royalty-free license for this technology to Sanofi-aventis, the French pharmaceutical giant. The goal is widespread market availability by 2012. Once commercialscale production takes place, artemesinin will be more widely available at a much lower cost, saving millions of lives of which the majority will be children in sub-Saharan Africa. This effort established a proven technology platform and a brand name for Amyris. From that beginning, Amyris had its initial public offering (IPO) in September 2010. Since then, the share price has ranged from less than US$20 to the high thirties. As an industrial synthetic biology platform to convert plant sugars into a variety of hydrocarbon molecules, flexible building blocks which can be used in a wide range of products, Amyris, along with other biofuel companies, is primarily viewed as a play on the fluctuations in the price of crude oil. “The goal of Amyris is to leverage sugar all the way to the end product,” said Jeffrey Brown, vice president, lubricants. First seeking venture capital funding in 2001, there was not much investor interest as the price of oil was low. In 2006, it was a different story. “We went out with the aim of raising US$7 million and ended up with US$20 million,” said Jack Newman, vice president of research and Amyris co-founder. In 2001, the average price of crude oil was US$23 per barrel, hitting a low of US$16.21 in December. In 2006, it averaged US$58.30, peaking at US$66.28 in August. Like all alternative energy stocks, buying interest in Amyris’ shares rises with the price of crude oil. Not just limited to the biofuel market, Amyris is commercializing a wide range of offerings in its line of No Compromise® renewable ingredients in cosmetics, flavors, fragrances, polymers, lubricants and consumer products. The corporate mission of Amyris, in the words of Brown, “is to achieve the highest level of traditional performance with the highest level of environmental performance.” This has been driven by the commercialization of farnesene, a pure hydrocarbon molecule. Farnesene forms the basis for a wide range of products, from specialty chemicals to lubricating base oils and fuels. “That is the centerpiece for all of our downstream chemical. The main attraction is it is the perfect diesel molecule,”

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Brown told the Annual Meeting of the Society of Tribologists and Lubrication Engineers in Atlanta, Georgia, in May. “Lubricants provide a very nice platform to scale our technology on,” he said. Amyris intends to enter the Group III base oil market in 2012 on a small scale, with an initial production of 10 million gallons. However, Amyris intends to grow its base oil business globally, he told F+L Asia. Production facilities are currently located in Brazil, a global leader in ethanol production and use. Operating in Brazil allows for proximity to the sugarcane infrastructure in that country. This will stabilize production costs for the future as the raw materials are nearby and not subject to fluctuations in the commodities markets. The first production facility, a capital-light, joint venture with Usina São Martinho, is projected to be fully operational by the second quarter of 2012. The goal of Amyris is a fully integrated business model, to control costs and to manage the commercial process from the sugarcane field to the customer fuel tank. “It’s our goal to be vertically integrated,” said Brown. Amyris Brasil S.A., a subsidiary, oversees the company’s production in Brazil. Amyris also has established a subsidiary, Amyris Fuels LLC, which will generate revenue from importing and distributing renewable fuel products to the U.S. market. At present, Amyris Fuels operates through a network of terminals in the southeastern U.S., providing thirdparty ethanol to wholesale customers.

“The corporate mission of Amyris, in the words of Brown, ‘is to achieve the highest level of traditional performance with the highest level of environmental performance.’” This business model has resulted in a market capitalization of about US$1.3 billion for Amyris at the end of May. With this, Amyris presents a more solid financial foundation than any of its industry competitors. No rival is even half the size of Amyris based on market capitalization. The stock is trading above both its 50-day and 200-day moving average, a show of market support for an upward trend in the vector of Amyris’ shares. The debt-to-equity ratio is under 1%, which is extremely low and allows for cash to go for research, development and sales efforts, rather than to pay off creditors. Its fiveyear growth rate for earnings is projected to be 100.32%.

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Amyris Fermentors at Biomin Facility, Emeryville, Calif.

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Farnesene:

ELEGANT IN ITS SIMPLICITY by Cristine Villena Amurao

SYNTHETIC BIOLOGY IS A FASCInating and dynamic field. It seems to be potentially highly profitable as well if things go as well as it has been going for Emeryville, Calif.-based Amyris Inc., an integrated renewable technology company. According to Jeffrey Brown, lubricants vice president, the company’s mission is to provide the same consumer products the world craves using renewable sources. It is also a response to the increasing demand for energy and to address climate change, he said. The science behind Amyris’ clean energy technology may seem simple, but is not, and is certainly elegant in its seeming simplicity. Who can figure out what is the connection between sugar, apples, gardenia, sweet wormwood tree and malaria? It takes an intuitive leap of faith and a keen scientific mind. Jay Keasling, professor of Chemical and Biomolecular Engineering and director of the Physical and Biosciences Division of the University of California, Berkeley, took up the challenge to find a way to produce a chemical called artemisinin, which is found in nature in sweet wormwood or Artemisia annua leaves. The extract of the sweet wormwood leaves, called ginghausou, is used as an herbal medicine. Although it has been used for its medicinal properties for more than 2,000 years in China, it has only been in the last few decades that more intense research and funding has been given to new treatments and prevention for malaria, a deadly disease that has affected mostly poor nations in Africa, South America and Asia. The Bill and Melinda Gates Foundation gave the funding for the artemisinin project. The research team, led by Keasling, did not try to grow a lot of sweet wormwood trees as a source of the chemical, but instead, created little chemical plants in the form of genetically modified yeasts to produce artemisinin. The key to the problem is making the genetically modified organism “eat” a certain chemical, sucrose in this case, process it, and “spew out” or produce the desired end product in commercial quantities at affordable prices. They succeeded and the anti-malarial product will be available this year. Amyris has leveraged the same biology and refining technology all the way to produce different hydrocarbon products. Brown talked about the direction the company has taken in the biosynthetic engineering

of hydrocarbons during the 2011 Annual Meeting of the Society of Tribologists and Lubrication Engineers in Atlanta, Georgia. The genetically modified yeast placed in fermentation columns “eats” sucrose (C12H22O11) from sugar (they add water and other vitamins) and through the mevalonate pathway (a metabolic process), it excretes other organic compounds. The oil that is excreted separates from the water and yeast substrate, making it easy to harvest or extract. Farnesene (C15H24), like artemisinin, is a terpene which is a group of small carbon-based molecular products synthesized by plants. These terpenes are the target end product of the modified yeast cells. It is actually found in nature in several forms, the alpha and beta (β) farnesene isomers. Alpha farnesene is found in the coating of green apples and other fruits. It is also the source of the typical green apple odor. β-farnesene is found in essential oils and insects. Gardenias owe their gorgeous rich smell to farnesene. It is a great building block for base oils because it is a pretty big molecule, said Brown, and they would not have to do a lot to build it back up to create the end product, unlike other compounds. It is linear (structurally no aromatic rings) with branching and is unsaturated, giving the molecule great flexibility when it comes to creating downstream products, he said. It is, in its natural form, very close to a base oil product. The Amyris β-farnesene (BiofeneTM) base oil product offers high performance, yet is environmentally friendly unlike traditional high performance base oils which are not “green.” It meets or exceeds industry standards at a competitive price. Brown said its product will redefine performance in the base oil industry. The Amyris product has a high viscosity index and is similar to Group III base oils. Pour point is even better than Group III base oils, and is nearer to polyalphaolefins (PAOs) at negative 60°C. NOACK volatility is also comparable to that of Group III and PAOs. Only the cold cranking simulator (CCS) viscosity of this product is not yet at the optimal level, although it is still at par with Group III, he said. The company is continuing to refine the chemistry to improve on this property. In addition to the data supporting its properties putting it at par with Group III, III+ and even PAOs, it is 100% renewable unlike petroleum-based products. It is 70% bio-

degradable, using Organization for Economic Cooperation and Development (OECD) 301B standards. It is non-toxic and is in fact being looked at as a potential product for use in the food industry. The company is in the process of getting food-grade certification. It is also pure (no contaminants) and is recyclable. Thus, it can go down existing waste infrastructure. Amyris is continuing with the process development of its base oil products and plans to go into process transfer and validation during the third quarter. The company hopes that by the last quarter, they will be able to start with pilot production. By 2012, they plan to go into early industrial scale production. Brown estimates that they will be able to produce 10 million gallons initially. Testing with additive systems is being done and the products being developed will have both automotive and industrial applications. Fuels and lubricants go hand-in-hand, said Brown, and lubricants was a great platform to go into other products. “There are a lot of powerful transformations along the cellular pathway,” he said, and the company has leveraged that into other areas. He said that other products are being developed with carbon 10 (C10) based jet fuel products for the aviation industry and carbon 5 (C5) isoprene products for the rubber industry. Isoprene is also a terpene. Another product being developed from farnesene is squalene, which is used in cosmetics for its moisturizing property. It is typically sourced from shark liver or olive oil. The underlying principle is using common biological processes to create products from the same family of hydrocarbons. There are other potential raw materials for this technology. They have used sugar, primarily from sugar cane, but they can also use cellulose, corn syrup or any organic material wherein hydrocarbon can be extracted. Sugar was used primarily because the core technology for its use was already in place. With Amyris’ partnership with Cosan, Brazil’s largest player in the sugar and energy industry, it provided them an existing infrastructure to forge ahead quickly with the development and production of farnesene. There are already farnesene plants in Illinois and in Brazil. From there, they can ship the product all over the world. Another important upside is that the farnesene products are considered petroleumbased when it comes to taxation and importation. Thus, it enjoys the tax benefits that petroleum-based products do. The potential for the development of new products and old products using new technology is exciting. Amyris’ use of synthetic bioengineering is just getting started with the roll-out of its base oil production and its medical applications. As Brown said, they have leveraged the biological processes, taken the cell biology downstream to create these different hydrocarbon products.

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FE AT U R E

China misses fuel quality targets by Kelly Thornton

THE STATISTICS ARE ASTONISHING. IN JUST A DECADE, the number of registered trucks, cars and buses on the road in China has quadrupled, from 13.5 million to more than 60 million. And according to government projections, that number will exceed 150 million by 2015 and 200 million by 2020, as demand continues to grow in the world’s largest automobile market. Equally shocking are the costs associated with such rapid growth: Skyrocketing greenhouse gas emissions. Soaring consumption of imported oil, from zero to more than 50% in a matter of 20 years. Urban gridlock. Pollution so thick, some days you can’t see the other side of the street. And increasing health problems, from asthma to cancer. A recent study by China’s leading environmental experts found it may take two decades to see comprehensive improvement. Although China’s emissions and fuel standards lag years behind Western Europe, the United States and Japan, it has followed the lead of these developed countries.

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S w

In 10 years, between 2000 and 2010, China has reduced its total hydrocarbon emissions by 44.5 million metric tons (MMT), carbon monoxide emissions by 238.7 MMT, nitrogen oxides (NOx) by 38 MMT and particulate matter by 7 MMT, said Tang Dagang, director general of the Vehicle Emission Control Center within China’s Ministry of Environmental Protection (MEP). In doing so, it has avoided an estimated 170,000 pollution-related deaths, particularly in large metropolitan areas, studies show. The value of these avoided adverse health impacts is conservatively placed at US$25 billion. Still, experts say the ambitious policies don’t go far enough to keep pace with the explosive growth in vehicle population. And nationwide implementation of China’s latest emissions standard known as China 4, which is based on its European equivalent, has been inexplicably delayed. So far, China 4 standards have only been implemented in Beijing, Shanghai and Guangzhou. That will delay progress to

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the subsequent levels—for example, the more stringent China 6 was supposed to be implemented in 2015, but now isn’t expected to be adopted until 2020. That delay will have consequences, according to a recent report commissioned by MEP, which sets China’s environmental agenda. “Scenarios that achieve China 6 by 2020 lead to 30 to 70% more NOx emitted than the scenarios where China 6 is reached by 2015,” the report prepared by the Washington, D.C.based International Council on Clean Transportation (ICCT) said.

Walsh

Tang

There’s no doubt that China is making progress on the environmental front. But there are big challenges ahead and delays only exacerbate the problems. The delays have been the topic of much discussion in recent months. The primary reason for the delay seems to be the inadequate supply of low-sulfur fuel nationwide. “Our fundamental challenge is how to ensure a stable supply of fuel of such quality that all negative environmental impacts from the fuel are eliminated or minimized,” said Tang. Satisfying China’s thirst for oil is not an easy task. According to the BP Statistical Review of World Energy released in June, Chinese oil consumption last year grew by 860,000 barrels per day (BPD) or 10.4% China alone accounted for 640,000 BPD of new refinery capacity last year, almost 90% of the total global capacity addition. Exacerbating the situation is the projected electricity shortfall this summer of as much as 40 gigawatts, which should boost diesel fuel demand further. Some experts believe the delays are political in nature. Emissions standards are adopted at the federal level by the MEP— but the MEP lacks enforcement capabilities over fuel standards. Reduction in harmful vehicle emissions must go “hand-in-hand” with improvements to fuel quality. Further complicating the issue is that the MEP has virtually no authority over powerful state-run oil companies. The lack of coordination between

vehicle emissions and fuel quality standards makes for a difficult, but not uncommon, problem. But since the technical committee that sets fuel quality standards is dominated by representatives from the oil industry, the solution is complicated. “A core problem is that, in contrast to the U.S. Environmental Protection Agency, the MEP in China does not have the authority to set fuel quality standards,” said Walsh. “It can continue to push emission regulations but the two go hand-in-hand. That has been the fundamental challenge not only getting to where they are but also going forward.” The result is that vehicle emissions restrictions and fuel improvements are not on the same page. “Regarding fuel quality, the gasoline sulfur level nationwide is already 150 parts per million (PPM) [China 3] and the Ministry thinks they have an agreement with the oil industry to go to 350 PPM sulfur [China 3] nationwide for diesel fuel on July 1,” said Michael Walsh, a consultant and chairman of the ICCT board, which produced the study. Meanwhile, Beijing, Shanghai and Guangzhou are at 50 PPM sulfur [China 4] for gasoline. “Beijing tells me they have an agreement to go to 10 PPM sulfur [China 5] in 2012 and probably China 5 vehicle standards before the end of the year but that is not formally adopted yet because MEP must first issue the China 5 standards and they have been proposed but not yet finalized,” Walsh said. “I am reasonably confident they will be finalized before the end of the year and that Beijing will be able to go ahead,” he said.

“Our fundamental challenge is how to ensure a stable supply of fuel of such quality that all negative environmental impacts from the fuel are eliminated or minimized.” On the matter of vehicle emission standards, Walsh said that the MEP has decided that China 4 for gasoline cars will go into effect on July 1, 2011 and China 4 for trucks on January 1, 2012. “The decision on diesel cars for January 1, 2013 has not been made yet but that is where the Ministry would like to go,” he said. Higher sulfur levels in gasoline leads to higher NOx, carbon monoxide (CO) and hydrocarbon (HC) emissions because

sulfur in gasoline impacts three-way catalytic converter technologies. Further, operating China 4 vehicles on China 3 gasoline would lead to higher emissions of HC, NOx, CO, benzene and other harmful pollutants. There are other theories about the reason for the delay in implementing China 4 nationwide. For instance, compliance with China 4 is an expensive proposition for small-truck manufacturers. “I believe China 4 is mainly delayed to protect small-truck manufacturers and avoid the high increase in cost in the construction industry,” said Claudio Operti, technical director for Moteurs Baudouin in Cassis Cedex, France, and director of technology for its parent company, Weichai Power Co. Ltd., in Shandong, China. “But this cannot last forever, and I believe there are enough pressures on the other side to get China 4 fully implemented…I expect in the first half of 2012 at the latest, maybe with some exception for extreme areas of China.” Operti is not convinced that the lack of availability of low-sulfur fuel is driving the delay. While acknowledging that even China 3 fuel is not available today across the entire country, he said the technology used to comply with China 4 is “insensitive” to fuel quality. “The fuel issue is just a technical excuse,” Operti said. He acknowledged that some China 4 technologies, such as EGR + particulate trap, require low-sulfur fuel, and the system can be permanently damaged by high-sulfur fuel. “But the technology used by all manufacturers for China 4 is the SCR-DeNOx system using urea solution. And this technology is insensitive to fuel quality… the remaining issue is the availability of the urea solution, but this is a very easy problem… urea is available and distribution is easy, initial quantities will be low,” Operti said. China’s heavy-duty truck market, in fact, is expected to decline by 12.4% to 850,000 units this year, due to a weaker GDP outlook as a result of macro tightening and an unfavorable regulatory environment, according to American investment banking and securities firm, Goldman Sachs. “We think volumes might pick up in 4Q11, if macro policy is loosened in 2H11 and due to a possible frontloading effect before stricter fuel efficiency and emissions standards become effective in January 2012,” a Goldman Sachs report said.

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AxleFacts.com: Harness the Power Knowledge is power. And in today’s rapidly evolving gear oil market nothing is more essential than knowledge – dependable information on what’s new, what’s changing and what’s important to you. That’s why Lubrizol developed AxleFacts.com, a one-stop, online knowledge center. AxleFacts covers the basics – gear oil credentials, lubricants information, hardware – while bringing you real-time industry updates, insightful commentary and an early look at innovations from OEMs/tier suppliers. Register today at AxleFacts.com. Harness the Power. With you every step of the way. www.lubrizol.com © 2011 All rights reserved.

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FE AT U R E

by Hank Hogan

EU’s universal fuel approach may present huge challenge for OEMs

HE EUROPEAN Union’s universal fuel approval requirement for heavy-duty diesel vehicle manufacturers come 2013 appears to be on a collision course with a growing trend towards fuels diversity. “This is a trend that is worrying, because we could, if we’re not careful, within a few years end up again with 10 different national fuel standards in Europe alone. You might still have the European standard, CEN, but only half of Europe use it,” said Anders Röj, fuels and lubricants manager at Volvo Technology Corp. in Gothenburg, Sweden. 30 F U E L S & L U B E S I N T E R N AT I O N A L Q u a r t e r T h r e e 2 011

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“This could be a very bad thing from a vehicle manufacturer’s point of view,” Röj told the UNITI Mineral Oil Technology Congress in Stuttgart, Germany, in April. A spokesperson for the European Commission, Carlo Corazza, described what the universal fuel approval is all about. The EU’s emission standards are defined in a series of directives. These amendments to the 1970 Directive 70/220/EEC create the progressive introduction of increasingly stringent standards. The stages are typically referred to as Euro I, II, etc. for heavy-duty vehicles. Compliance is determined by running the engine at a standardized test cycle. Euro VI is slated to be implemented in the EU in January 2013 for heavy-duty diesel vehicles. The approval process for Euro VI-compliant fuels will be similar to earlier standards.

Using reference fuels, the limit for hydrocarbon emissions is 0.13 grams per kilowatt hour (g/kWh), from 0.46 g/kWh in Euro V. NOx limits will be down by a fifth from Euro V, to 0.4 g/kWh. Allowable particulate matter will be halved, from 0.02 to 0.01. With Euro VI, the legally required reference fuel is B7 (7% biodiesel-93% petroleum diesel fuel blend) for diesel engines, and ED95 (95% ethanol-5% ignition improver blend) for modified diesel engines where high compression is used to ignite the fuel. For positiveignition engines, the certification fuels are E10 (10% ethanol-95% gasoline blend), E85 (85% ethanol-15% gasoline blend), liquefied petroleum gas and three classes of natural gas/biogas blends. In addition to using reference fuels,

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a vehicle manufacturer can specify a broader set of fuels, such as B30 or B100. With Euro VI, however, this assertion will carry certain emission expectations. “The engine should comply with the regulation also for the full range of fuels,” Corazza said. That is a key difference with previous standards, where a vehicle only had to meet emission limits when running on reference or certification fuels. The reason for the change is straightforward. What comes out of the tailpipe in real life may actually be different than the results obtained when running the vehicle using certification fuels. The EU wants to close this gap, he said. “If the manufacturer claims that the engine can run on a specific type of fuel, then the emissions should also be kept under control,” Corazza said. Implementing this universal fuel approval approach may be easier said than done. Part of the challenge has to do with the increasing diversity of transport fuels. In the 1980s, the transport fuel mix was simple—gasoline with different octane ratings and one or two grades of diesel fuel. Today, there are numerous gasoline/ ethanol blends, compressed natural gas, liquefied petroleum gas, as well as various diesel fuel/biodiesel blends. Meeting current vehicle emissions limits across this range of fuels is difficult enough. In the future, it could be tougher not only because of the stricter limits but also because the number of fuels is likely to continue to grow. “Because of national allowances and tax schemes, we will have an increased variety of fuel blend levels around Europe, which are not, in all cases, fully proved that they’re all right,” Röj said. A 2011 study from the Öko-Institut of Freiburg, Germany, forecasts that the EU’s transport sector will be comprised of 80% biofuels by 2050. This represents a significant increase from the less than 6% today. In an April report, the International Energy Agency (IEA) predicted that worldwide, biofuels will comprise 27% of total transport fuels by 2050. The growth of biofuels’ use presents a big challenge when it comes to vehicle compatibility, engine durability and emissions. The latter is particularly important in the context of the EU’s universal fuel approval. For instance, studies have shown that trace contaminants found in biofuels can lead to corrosion, injector deposits and plugging of fuel filters. Some of the contaminants can poison the catalyst in exhaust after-treatment systems, which is a critical component in emissions control.

“The introduction of biofuels has led to a number of issues that are not related to the hydrocarbon counterpart.” Speaking at UNITI, Engelen said that tests to detect biofuel-related problems are now being developed. Various options are being considered. For cold-starting, for example, the most likely might be limits on total allowable mono-glycerides, combined with cloud point and cold filter plugging point requirements. “The introduction of biofuels has led to a number of issues that are not related to the hydrocarbon counterpart,” Engelen said. He pointed to injection and after-treatment systems as two areas which need to be addressed by adjusting fuel properties. This is because trace contaminants impact on the effectiveness of after-treatment systems and the overall durability of the engine. The oxidation stability of biodiesel in diesel blends also remains an issue. European biodiesel must meet an induction period (IP) of at least six hours, when tested at 110°C using methods defined in EN 15751. A longer IP is better, since it is a measure of fuel stability. Fuels rapidly decompose past the prescribed IP. It is possible that the six-hour minimum may someday be changed, as it translates into an amount of storage time that is temperature and environment dependent. Tests in southern France with passenger cars and commercial vehicles, as well as sealed metal and plastic drums, showed that B10 fuels degrade at different rates, depending on their storage. As delivered, B10 had an IP of 50 hours. After four weeks, the IP dropped to 25 hours in the tank of a passenger car, 45 hours in a commercial vehicle and 48 hours in either sealed metal or plastic drums. After six months, the IP of fuel in

sealed metal drums and commercial vehicles aged similarly, at about 40 hours. However, the IP of fuel in sealed plastic drums dropped to 30 hours. In passenger cars, the IP was 10 hours. It’s unlikely that fuel in a vehicle will sit idle long enough for problems to crop up. This could happen, though, in hybrid vehicles and under exceptional circumstances such as in long-term airport parking lots. Fuel degradation in sealed containers, particularly plastic ones, could also be significant. These results are from a joint industry study that was initiated to come to a consensus view on the issue of oxidation stability of biodiesel blends. However, the study led to more questions than answers. “At a certain point in my speech, I did mention that we were learning as we walk,” said Engelen. The industry is involved in the continuous process of developing tests, he said. Work is also underway to create a consensus approach to address these and other issues. For OEMs, there is also another factor to consider: the use of fuels other than those specified. A case in point, said Volvo’s Röj, can be seen in sulfur levels. For Euro IV and beyond, these levels must be at or below 10 parts per million (PPM).

Röj

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Engelen

For Europe and the rest of the developed world, that requirement presents no problem because ultra-low sulfur fuels are readily available. That’s not the case in emerging markets, however. Many countries adopt EU regulatory schemes, without the required fuels being available in the marketplace. One result is local regulatory variants. India, for example, has a two-tier system, as does China. Parts of India have less than 50 PPM sulfur in diesel fuel and stricter emission requirements, while the rest has 350 PPM or even higher sulfur and lower emission requirements. Additionally, government subsidy for kerosene makes it much cheaper than diesel fuel, leading some to use it to adulterate diesel fuel. This reality means that emerging markets should adopt Western regulations cautiously.

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The nature and level of such contaminants depend on the feedstock and the process used to produce the biofuel. For diesel fuel, there are other issues that could impact compatibility, durability or emissions. One that has cropped up involves cold flow properties. During the 2007 and 2008 European winters, there were reports of fuel filter blockage. The problem was traced back to the precipitation of saturated mono-glycerides and, partly, from sterol glucosides, said Benoit Engelen. A fuel quality advisor for Total Marketing Europe, the marketing arm of the French oil company, Engelen is the convenor of CEN/ TC 19 WG 21, the European standardization technical committee working group on unleaded gasoline specifications.

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SETS A

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FE AT U R E

S ANOTHER FIRST

:52 PM

by Kelly Thornton

Limits volatile organic compounds in metalworking fluids WHEN JOHN BURKE WAS chairman of the Safety, Health, Environmental & Regulatory Affairs (SHERA) Committee of the Alexandria, Virginia-based Independent Lubricant Manufacturers Association (ILMA), he received a call from a panicked member. Mike Pearce, chief formulator and senior salesman at Los Angeles-based W.S. Dodge Oil Co., was full of anxiety over a move by Southern California officials to do something that had never been done before—regulate smogcausing volatile organic compounds (VOCs) in metalworking fluids and direct-contact lubricants. Three years later, Pearce jokes that it was a “controlled panic.” But Burke said Pearce’s sentiments were more serious: “Mike said, ‘They’re going to regulate these fluids. The world’s going to end. They’re going to shutdown all the metalworking.’”

Now that the new and groundbreaking amendment to an existing regulation, known as Rule 1144, is about to take effect, Burke and Pearce both agree on this: If the rest of the metalworking world hasn’t already panicked, it is likely to experience at least some of the same trepidation Pearce did when those new rules reverberate not only within Los Angeles (LA), but across the United States, and even beyond U.S. Shores. California tends to be a trendsetter when it comes to regulations, so what happens there usually gets adopted somewhere else. “I’ve met with a few end users, and I think they’re still in a state of shock,” Burke said. That goes for manufacturers and distributors, too. The regulations which were set by the South Coast Air Quality Management District (AQMD) were first adopted in 2009 and strengthened in July 2010.

Some limits are now in effect, but the most stringent along with labeling and record keeping, will be imposed in January 2012. It’s the first time a regulatory agency has established VOC limits in metalworking fluids through a validated testing method. It’s also the first time manufacturers will be required to report annual sales of metalworking fluids, and to label containers with VOC content levels. Manufacturers, distributors and users in the Los Angeles area can be fined for creating, selling or using noncompliant fluids. AQMD, facing federal requirements to cut its considerable air pollution problem, approached the lubricant industry, through ILMA, and together the parties agreed to develop an accurate way to measure VOCs and to establish limits everyone could live with. The AQMD has projected that the

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new VOC limits in metalworking fluids will result in daily reductions of 0.86 tons per day (tpd), out of the total of 3.7 tpd of VOCs generated. The broader rule will reduce VOCs by 3.6 tpd, out of the total of 5.3 tons generated daily. AQMD is under federal mandate to reduce VOCs by 102 tpd over the next 20 years. “It’s a big deal for us,” said Naveen Berry, planning and rules manager at AQMD. “It’s a pretty big emission reduction item for us.” The Los Angeles area, famous for its smog, is the largest manufacturing center in the United States, more than any other metropolitan area, including Chicago and Detroit. The market is heavily driven by aerospace, the number one metal industry. An estimated 7,000 to 10,000 metalworking companies in the region cut, stamp, form and grind metal to make nuts, bolts, door locks, hinges, body and engine parts on cars—“just about everything we use in our daily lives,” Pearce said. Metalworking fluids are used in all those processes. The amendment to Rule 1144 has established a VOC content limit of 50 grams per liter (g/l) for direct-contact lubricants; 75 g/l for metal forming, metal removal and metal treatment fluids; and, 130 g/l for precision metal removal fluids, effective January 1, 2012. Regulators estimate a one-time maximum cost of US$2.5 million for testing VOC content. The overall cost effectiveness of the rule, including both adoption and amendment, is US$6,408 per ton based on emissions reductions of 3.6 tpd. Overall annual cost is US$8.4 million, said Morris. The rules require that all such fluids manufactured, sold and used in the Los

Angeles area be measured for VOCs using the newly developed test. Previously, there was no reliable test to determine VOCs for semi-volatile lubricants. So VOCs were not reported on labels and, therefore, not required to be included in a user’s annual emissions report to regulators. The new test is approved by the American Society for Testing and Materials (ASTM).

It’s an example of how the rule has widespread implications. “You wonder, why would I care if I’m in Columbus, Ohio, or Detroit, Michigan, or Cincinnati or D.C.? Well, drums could end up anywhere. And they are now going to have labels on them spelling out the amount of VOCs in the product,” Burke said. Now the end users will have to add these VOCs into their annual air emissions inventory, which determines compliance to local air emissions standards. These VOCs could push some companies over the edge, into non-compliance. “If they’re a large user and they’ve While the rules on their face seem only been reporting zero VOCs, that could be a to apply to the Los Angeles area, industry problem,” Burke said. experts are keenly aware that they will have Pearce agreed. Most people have not significant implications far beyond that been reporting cutting oil as part of their region’s borders. emissions inventory, he said. On a national A few manufacturers, wary of stories level, this is going to have a very profound of thousands of dollar in fines when effect, especially on large manufacturers, unlabeled products mistakenly ended up he said. in LA, have already started including VOC “The biggest impact is going to be VOC content on product labels. where none was thought to exist before,” Burke, who is also director of Pearce said. “That’s the real critical thing. engineering services for Houghton You’re going to have a lot of companies in International, a global manufacturer of Europe and Asia, people who make and metalworking fluids, got another interesting sell these products all over the world, and call about six months ago from a client— divisions in the U.S., start reporting these a major automobile manufacturer. VOCs. It’s going to spread faster than In anticipation of the new VOC people realize.” labeling rules, Houghton had sent out an Pearce believes that overall, the new updated report that listed VOC content for regulations will have a positive effect, the first time. however, not only for the environment, “He said, ‘When did you start putting but also to level the playing field. VOCs in your product? There’s VOC there “Getting these high volatility materials and you never told me? What’s going on?’” out of the pipeline can be done and getting Burke recalled. “He was screaming. I said, them out of the environment helps,” he ‘We didn’t just put it in there. It’s been said. And if everyone is testing, reporting there all along.’ You can see how this has and limiting VOCs, “everyone will be opened up a can of worms.” playing by the same rule book.” Some of the larger companies have recently become aware of the new rules. Pearce said General Electric, the big three U.S. automakers, Alcoa Fastening Systems and others have recently initiated meetings with industry experts to discuss the issue.

“The biggest impact is going to be VOC where none was thought to exist before.”

Rule 1144

Rule 1144 was adopted in March 2009. It established VOC content limits for vanishing oils and rust inhibitors, also known as metal protecting fluids, which are used during metalworking operations. But those fluids represent a small fraction of fluids used by machine shops. The bulk of fluids used are metalworking fluids and lubricants, which are mostly made up of semi-volatile compounds that are more viscous and could not be

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measured accurately by old VOC tests. AQMD wanted to expand the rule to include these fluids, but the industry balked because of the absence of a reliable and accurate test. Regulators and the industries they govern traditionally have a difficult relationship. But in this unusual case, they teamed up to develop a test and to set limits. Burke calls it “negotiated rulemaking.” “They called (ILMA) and said help us work out a standard that you can live with, instead of here’s a new standard and you can fight us later,” Burke said. ILMA representatives said they would rather be part of the process than let AQMD make the rule unilaterally. ILMA’s biggest problem was that the testing methodology being used by AQMD at that time was generating higher VOC content than it believed to be the case. “AQMD has a reputation of being very heavy handed, dictating what they’re going to do,” said Pearce. “It didn’t work that way. We really worked together to come up with this new rule.” They decided to revise an existing ASTM method, ASTM E1868, by incorporating the results of an interlaboratory study coordinated by ILMA. The result is ASTM E1868 – 10, otherwise known as the Loss-On-Drying by Thermogravimetry (TGA) test method. “The breakthrough in cooperative relationship with ILMA was to design a method that reflected what we were seeing in real life,” said Mike Morris, air quality specialist at AQMD. Most fluids will have no problem meeting the new VOC restrictions, according to the AQMD. It’s the light, naphthenic oils with viscosities lower than 5 centistokes (cSt) at 40°C that will have a bigger challenge. Traditionally, light oils are used as a blending material, along with much higher viscosity lubricants (greater than 38 cSt), to form medium viscosity fluids (10 cSt). The proposed limit will restrict this practice and require manufacturers and distributors to formulate with higher viscosity oils, AQMD said. Officials have suggested that the rule means businesses will have to transition away from light oil blends to medium viscosity straight cut oils. An agency report said that “changes in demand have leveled the prices so that light oils can be eliminated without impacting costs.” Water-dilutable metalworking fluids and vegetable-based oils may be used as

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“You’re going to have a lot of companies in Europe and Asia, people who make and sell these products all over the world, and divisions in the U.S., start reporting these VOCs. It’s going to spread faster than people realize.” potential alternatives to light oils. While vegetable-based oils are significantly more expensive than naphthenic oils, they have superior cooling properties and allow for increased machine efficiency, which translates to lower labor costs. Naysayers

Not everyone is on board within the industry. For instance, some industry members have suggested that AQMD has overstated emissions reductions from the new limits, while understating compliance costs. Others dismissed solutions offered by the agency. And some local blenders complained that they may have to relocate because the rules are too heavy-handed.

One critic wrote: “Rule 1144 as it stands produces great, if economically impossible, hardship on our manufacturing process… Unless the government can offer a viable solution, we face either noncompliance with the rule or the probability of relocation or closure in 2012…We cannot fathom why the government chooses to be the limiting factor that will ultimately force what no other competitor or economic woe has been able to accomplish; the closure or huge expenditure of an industrial relocation to a more economically sustainable governance.” Some critics said AQMD has mistakenly asserted that a change from naphthenic base oils to paraffinic base oils is easy. “A wide range of additives do not solubilize and/or respond properly in paraffinic base oils, especially extreme-pressure additives and emulsifiers,” said one critic. AQMD published these concerns, and its responses, in its own reports. To assist blenders how to comply with Rule 1144, AQMD will hold a symposium on March 8, 2012, at its Los Angeles headquarters. It’s free and will be webcast.

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PRODUC T LIFEC YCLE

HOW MANAGEMENT

can help your business

by Hank Hogan

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FE AT U R E

THE WAY GEORGE YOUNG SEES IT, TURNING A PROFIT IN THE chemical industry will increasingly benefit from managing products from conception to death or, in industry jargon, product lifecycle management (PLM). Young is CEO of Kalpyso LP, an innovation consulting firm in Beachwood, Ohio. The advent of tools written in ways that make sense to chemical formulators and a better business climate for the deployment of such tools are the reasons why there is a growing use for PLM, he says.

“I

think you’ll see more rapid adoption of it, as the industry, I think, has more appetite for capital spending, more appetite for building more innovative solutions.” PLM can be a single program or a collection of software, as well as working methods. Together, these can address either single stages of the lifecycle, connect different tasks or manage the whole process. PLM is the creation and central management of all product data and the technology used to access this knowledge. Thus, it should be viewed as a software technology and management techniques serving a business strategy. PLM can help an additive or lube formulator to develop the least costly formulation by reducing the number of times the chemical wheel is reinvented. It can also help reduce response time to customer requests by enabling formulators to easily access previous research and results. One big advantage of PLM is its ability to search through old data more quickly and thoroughly. From his experience, the payback for implementing a PLM system usually runs less than two years, Young says. Many chemical companies use some form of PLM, with most doing so at a basic level. Some implementations can be robust. Specialty chemical companies, especially those that focus more on selling solutions, tend to go for a more robust system than commodity chemical producers. Knowledge workers in chemical industries typically are involved in formulating products. They tailor them to meet cost constraints and to be manufacturable using available production tools. Formulated products have to comply with the appropriate regulations as well. PLM can help meet these requirements, because it ensures full traceability of materials in any formulation, from the supplier to the application.

PLM can also reduce overall delivered cost because the tools can enable the examination of all possible formulations. The one that yields the highest profit margins can then be selected. This approach can not only save money, but it can actually win business, particularly when the speed with which a formulator responds to the request is critical. “The first person to meet the performance specification of the customer often wins,” Young says. Despite all of these advantages, robust PLM systems have not been widely adopted by chemical companies. Some of the reasons are financial, but others are technical. With regard to the latter, one of the issues is that PLM methods and tools have often seemed more suited to discrete manufacturing, such as the assembly of an airplane from parts. PLM’s roots can be traced back to the automobile industry. But that is changing with the advent of tools that speak the language of chemical companies. Infor, which is based in Alpharetta, Georgia, has deep roots in the chemical processing industry. Chemical product development focuses on formulation, specification management and regulatory compliance, says Venkat Rajaji, Infor PLM product manager. Environmental and sustainability issues are becoming more important, he says. Thus, tools that allow the early detection of potential problems have become more critical. With PLM, compliance can be designed right from the start. “Design for compliance means being able to formulate up front and ensure compliance instead of doing it reactively and managing compliance from a manufacturing perspective. When you do that, the cost of compliance increases, the cost of quality increases and the cost of manufacturing increases,” Rajaji says. In addition to the sustainability trend, he sees

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another. Product lifecycle intelligence means having brand analytics as part of PLM. This could allow discovering why one motor oil formulation sells better at a given location than another, for example. Understanding this situation is important when trying to sell a premium product, such as synthetic lubricants. Having better knowledge of what works—and what doesn’t—in marketing to consumers could help companies improve their product development process. Aras, in Andover, Massachusetts, is another PLM provider. The company bases its software on an enterprise open source solution, which eliminates licensing fees. The company’s products have modules suitable for chemical processing as well. Like other PLM vendors, Aras sees sustainability as a clear market driver for PLM, says Senior Vice President for Global Marketing Marc Lind. Environmental regulations vary by region, thus, a given product may have a different compliance

“When you factored in the combustion of the fuel in the vehicle, the net result was the higher chlorine engine oil, which was more fuel efficient, wound up being responsible for lower dioxin loading than the lower chlorine engine oil, which was less fuel efficient.”

Thiele

status in every country. PLM can accurately account for this complexity and do so in a flexible way. “Even when the product lifecycle model is represented accurately today, there will be ongoing changes in your markets which the PLM solution must be adapted quickly to address for both compliance reasons and consumer demands,” Lind says. Of course, like any model, what comes out of product lifecycle management is only as good as what goes in. Because regulatory compliance is such a large part of the chemical business, the environmental impact of a formulation is important. However, it’s not always easy to figure out exactly what that impact is. What seems to be obviously right may, in fact, be wrong. Take the case of residual chlorine in lubricants, which had been set at 50 milligrams per kilogram (mg/kg) by several vehicle OEMs for factory-fill and service-fill. The toxicity of the chlorine and the dioxins that chlorine creates are the reason for such limits, says Terry Thiele, sustainable products strategies director for Wickliffe, Ohio-based Lubrizol Corp. But the reality is that the chlorine in the lubricant is not a problem, Thiele says. The levels are simply too low to produce much toxicity. Instead, what happens is that other effects dominate, in particular the fact that lubricants with higher levels of chlorine also contribute to lower fuel consumption. That results in a completely different outcome than expected when oils of two different chlorine levels—50 and 125 mg/ kg—were compared in studies. “When you factored in the combustion of the fuel in the vehicle, the net result was the higher chlorine engine oil, which was more fuel efficient, wound up being responsible for lower dioxin loading than the lower chlorine engine oil, which was less fuel efficient,” Thiele says. It took years to get these results accepted, he says. In another instance, it may seem obvious that lengthening drain intervals would diminish any adverse environmental impact because less oil would go into the waste stream. Therefore, formulations with longer drain intervals would seem to be highly desirable. However, lubricant degrades with time and miles driven, which can ultimately hurt fuel economy. That can trigger another set of compliance issues related to fuel economy. The above examples illustrate that an environmental burden and the accompanying regulatory compliance

can be shifted along a supply chain in ways that are not immediately obvious. Lifecycle assessments can provide key information that can make PLM more accurate and comprehensive. On the other hand, gathering the required data can be challenging. A formulation may consist of mostly bulk material, such as base stocks in a lubricant formulation. Often, though, there are several components in an additive package, with each component imparting a desired property. Boosting fuel efficiency via the incorporation of chlorine-containing molecules is an example. However, an accurate environmental lifecycle assessment depends a lot on disclosure of data by suppliers. Some additive packages could be protected intellectual property. Fortunately, that amount of accuracy isn’t typically needed in real world situations, says Jon Dettling, U.S. director for Quantis. An environmental lifecycle assessment consultancy, the company is a spin-off of two engineering universities, the École Polytechnique Fédérale de Lausanne in Switzerland and the École Polytechnique de Montréal in Canada. “You see a lot of people placing too much emphasis on data collection within their own specific supply chain. A lot of times people could address the issue that we want to address without needing that much specific information,” Dettling says. “For many purposes it would be adequate to use industry average data for a lot of the information,” he says. Sometimes, this approach is in fact better. Highly specific data is tied to one particular supplier. If the vendor mix changes, then that very exacting data may yield less accurate answers than industry average values would. Of course, depending on how accurate the assessment needs to be, it may be necessary to have the input data as perfect as possible. One of the benefits of PLM is the ability to determine which variables have an impact on the environment and a product’s performance. Typically, only a small fraction of the parameters matter and the ability to identify them is important, says Thiele. On the matter of separating the important from the unimportant, Thiele says, “The critical exploration is finding the 15%. Using sensitivity will allow you to identify the 85% that you don’t have to dot every I and cross every T from a data standpoint because you know it’s not going to materially impact the output.”

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Belong, Engage, Learn, Benefit.

Call for Papers 6th Asia-Pacific Base Oil Conference March 4-6, 2012 18th Annual Fuels & Lubes Asia Conference March 7-9, 2012 Theme:

“Value Creation, Growth & Sustainability: Challenges and Opportunities” With the theme of “Value Creation, Growth & Sustainability: Challenges and Opportunities,” F+L Week 2012 will highlight the significant relevance of value creation and sustainability to the future growth and performance of the F&L business, the crucial factors shaping the business’ value horizon, the multidimensional nature of the challenges and opportunities associated with it and the deployment of innovative strategies, initiatives and management practices framed within the context of the theme featuring the following tracks: Market & Commercial Issues Technology & Innovation Environment & Society Operations & Best Practices Partnership & Collaboration

Serving as a bridge between developed and emerging markets Every year, both the Asia-Pacific Base Oil Conference and the Annual Fuels & Lubes Asia Conference cover technical- and market-related topics that are of extreme relevance to the industry. World-renowned industry experts have traveled to Asia to speak at F+L Week. Speakers have benefited from the collegial and informal atmosphere throughout the conference, which has been highlighted by ice breakers, such as an off-site dinner and a welcoming cocktail reception. This interaction is unique throughout the industry, and speakers usually go back to their organizations with a better understanding of the dynamics of the Asia-Pacific market.

Nominate NominateaaTopic/Speaker Topic/Speaker Suggest Suggesta atopic topicorornominate nominatea a speaker speakerwithin withinororoutside outsideyour your organization organizationvia via Like Asia,Inc. Inc. Likeour our page: page:F&L F&L Asia, Follow Followus usat attwitter.com/fuelsandlubes twitter.com/fuelsandlubes Follow our LinkedIn page: F+L Asia Key Date: September 15, 2011 Key Date: September 15, 2011 If you would like to participate a speaker, youtomay submit aas a Ifasyou would like participate 500-word to editor@ speaker, youabstract may submit a 500-word fuelsandlubes.com on or before abstract to editor@fuelsandlubes. September 15, 2011. If your paper com on or before September 15, is selected oralispresentation 2011. If yourfor paper selected for by ourpresentation conference advisory board, oral by our conference the deadline tothe submit your to advisory board, deadline writtenyour presentation is Decemberis submit written presentation 15, 2011. If15, you areIfunable to unable December 2011. you are totravel traveltotothe theselected selectedvenue, venue, youcan canopt opttotosubmit submita aposter poster you presentationinstead. instead. presentation

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FE AT U R E

ENERGY SEEN AS MOST PROMISING SEGMENT FOR INDUSTRIAL LUBRICANTS by Jonathan Yates

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INCE THE FOUNDING in 1866 of one of its predecessors, Vacuum Oil, the ExxonMobil Corporation (NYSE: XOM), through its various corporate permutations, has been at the vanguard of the market for industrial lubricants. In the almost century and a half since entering the product line, the focus of the company in the field of industrial lubricants has evolved with the needs of the marketplace and the demands of societal interests. At times the largest publicly traded corporation in the world in revenue, the three primary goals of ExxonMobil for its industrial lubricants division are consumer safety, sustainability for the environment and shareholder value enrichment. According to Ian Davidson, Mobil Industrial Lubricants global marketing manager, ExxonMobil adheres to the main tenets for sustainable development of The Brundtland Commission, formerly the World Commission on Environment and Development. From the report of The Brundtland Commission, “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Balanced against the objectives of The Brundtland Commission and its mandate to allow for “…future generation to meet their own needs” are energy demands expected to increase by more than one-third by 2030. This projected increase in energy needs presupposes that power, no matter what the source, will be used almost two-thirds more efficiently over that period, too. Overall, the marketplace for industrial lubricants is becoming increasingly more demanding. Operating environments are more challenging. Environmental regulations are more stringent. Natural disasters and political upheavals in various parts of the world are resulting in raw material supply shortages. The lubricants being produced by ExxonMobil under these dictates of the marketplace target five distinct enduser segments: paper, energy, metals, manufacturing and processing. Energy is expected to be the highest growth area at 35%, as it includes oil, gas and electrical power generation. Manufacturing, primarily food and plastics, is expected to post double-digit increases, also. All of these segments, particularly paper, are projected to experience higher demand in Asia-Pacific than anywhere else.

PHO OTO E XNXO N BMI O T O CO U R T E S Y EOXFXO MO L BIL

In China alone, the demand for industrial lubricant in all areas has been strong. In 2010, for example, China accounted for 44.3% of world steel production. Four of the top six nations in crude steel production in 2010 were in Asia (China, Japan, India and South Korea). Not only is the demand higher in Asia for industrial lubricants, it is an easier operating environment, though with a diffe-rent set of challenges. There are not as many instituted regulations and restrictions. “We see significant growth opportunities in Asia and the potential of its industrial base makes it an important region for the Mobil Industrial Lubricants brand,” said Davidson. For these end uses, the creation of industrial lubricants is a collaborative effort, he said. “That’s because they are formulated to help extend the life of machine components and reduce oil changes, as well as minimize equipment failure and unscheduled shutdowns.” In addition to the performance aspects, the numbers alone in the marketplace mandate such close contact. In ExxonMobil’s equipment builder database there are more than 60,000 entries. Of these, 6,000 are in constant communication with ExxonMobil, with 2,000 being the most active. Without working closely with these possible partners, it would be impossible to formulate the precise lubricant for the job, he said. “We work very closely with equipment builders. We have a dedicated team of engineers who work with equipment builders for two reasons: to understand what the equipment builders are doing with new hydraulic pump equipment so that we are capable of servicing it and to make sure the builder is aware of new lubrication technology like the Mobil DTE Excel series that we are bringing to the marketplace to make their equipment more efficient.” If the lubricant produced does not meet the demands of the job, days of productivity can be lost waiting for the new part to be located, delivered and then installed. This is particularly important in extreme applications, such as in wind farms, which are often located in remote, unpopulated areas. Even if the lubricant does allow for the equipment to operate, if it is not the optimal blend, the machines will not run at peak Davidson efficiency.

Of the lubricants being produced at present for the marketplace, about 90% are formulated with conventional base stocks, with the other 10% using synthetic base stocks. The synthetics being created are for the very high performance, very demanding jobs and receive the bulk of the research dollars. Synthetic lubricants have been produced by Mobil Oil since the 1940s. Synthetic lubricants have an array of advantages over conventional products. There is a measurably better low- and high-temperature viscosity performance at service temperature extremes, with better chemical and shear stability. Less of the product is lost through evaporation. Fuel economy is enhanced in certain engine configurations. Cold weather starting is greatly facilitated in extreme conditions.

“We see significant growth opportunities in Asia and the potential of its industrial base makes it an important region for the Mobil Industrial Lubricants brand.” In the field of alternative energy, synthetic industrial lubricants have been used for wind turbines over the past five years. Solar panels are particularly challenging, said Davidson, as the lubricant must protect the bearings as the panel slowly rotates, tracking the sun. This slow rotation exerts a great deal of pressure on the bearings continually, increasing the stress factor on the lubricant. The energy market in Asia has a huge demand for industrial lubricants, both existing and potential. Last year, wind power accounted for 41.8 gigawatts of electric generating capacity just in China. Due to its large land mass and expansive coast line, the wind power market in China has tremendous potential. Harvard University and Tsinghua University research has determined that wind power could provide China with all of its electricity needs by 2030. With countries turning away from nuclear power after the recent Fukushima Daiichi disaster in Japan, highperformance industrial lubricants will be needed to meet the growing alternative energy demands of the marketplace, especially in Asia. ExxonMobil has a much more challenging operating environment, in every meaning of the word. The costs and obstacles are higher. Physical surroundings are much harsher. “Sustainability” and “green” are factors that have become even more imposing.

F U E L S & L U B E S I N T E R N AT I O N A L

Q u a r t e r T h r e e 2 011

Vicky Villena-Denton

Publisher & Editor-in-Chief

Cristine Villena Amurao Hank Hogan Jeroen Looye Kelly Thornton Jonathan Yates Contributors

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Corporate (multi-user) US$498 Fuels & Lubes International is a quarterly publication that chronicles the latest trends, issues and developments in the fuels, lubricants and additives industries, with special focus on Asia-Pacific. Its contents are protected by international copyright laws. Unauthorized reproduction or distribution by print, electronic or other media is strictly prohibited. Fuels & Lubes International and F&L Asia, Inc., its officers and management, cannot be held liable for any misinformation inadvertently obtained. The opinions expressed by the writers do not reflect the opinion of the management.

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Sometimes even nature needs a helping hand

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