Fuels & Lubes International Q1 2010 by F+L Asia

Quarter One 2010 Volume 16 Issue 1

I N T E R N A T I O N A L

Is there a future for ILSAC? Algae: Hype or Real Game Changer?

What lies ahead...

> PCMO goes to next generation. > Oronite team goes to work. > Technology goes advanced. > Motor oil performance goes higher. > Your brand goes better.

Oronite is at the forefront of developing additive products and technologies for the next generation of passenger cars. We’re already working on additives to help your ILSAC GF-5 lubricants deliver increased fuel efﬁciency in modern engine designs; improved deposit control for cleaner, longer-lasting engines; and improved emission system compatibility to better protect the environment. Call your Oronite Account Manager today to ﬁnd out how we can help your business go farther. © 2009. 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.

Editor’s Corner For Asia, long-term growth means shifting gears THE FATE OF OUR INDUSTRY IS INTERTWINED Speaking at the Tokyo Foreign Correspondents with the pace of economic growth. That’s why news Club in January, Strauss-Kahn said the world was that the global economy, after having been badly seeing a multi-speed recovery, with different counbattered for two years, is recovering faster than pre- tries emerging from the crisis at different rates. viously anticipated, is welcome news indeed. Emerging markets, particularly in Asia, were Washington, D.C.-based International Mone- leading the recovery, but advanced economies tary Fund (IMF) said in its latest were still gaining ground forecast that world economic more quickly than anticipated growth bounced back from earlier. However, the recovery negative territory in 2009 to is fragile and growth, particua forecast 3.9% this year and larly in advanced economies, 4.3% in 2011. remains dependent on govThe IMF said that Asia ernment stimulus measures. will grow by 5¾% in 2010, far The IMF report projects higher than the 1¼% predictthat Asian countries will need ed for the G-7 economies, but to maintain policy support for still below the 6²/3% average some time as private demand recorded for the region over remains weak, and the outlook “For Asia to retain the past decade. is far from certain throughout its strong growth Given the region’s heavy the world. momentum, it needs dependence on exports, an The report added that to shift the drivers of IMF report warned that conover the longer-term, Asia’s recovery from an export tinued weak global demand future prospects will depend engine, much more into domestic demand.” could have a considerable imon the region’s success in alVicky Villena-Denton pact on Asia’s future growth. lowing domestic sources to Editor-in-Chief & Publisher “Asia has boomed as play a more important role in America’s consumption outpromoting growth. paced its income. If over the coming decade, “For Asia to retain its strong growth momenU.S. consumption slows markedly, the impact on tum, it needs to shift the drivers of recovery from Asia’s growth could be sizeable,” the report said. an export engine, much more into domestic deIMF Managing Director Dominique Strauss- mand,” said Anoop Singh, director of the IMF’s Asia Kahn warned that growth was still largely driven and Pacific Department. by government stimulus measures and risked a return to recession if anti-crisis measures are withdrawn too soon.

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

Q u a r t e r O n e 2 010

CONTENTS IS THERE A FUTURE FOR ILSAC? 22 Features Lubrizol resumes plan to build greenfield additive plant in China . . . . . . . . . . 8 The ups and downs of sulfur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Naphthenics get boost from EU directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Is there a future for ILSAC? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Greasing the path to the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Algae: Hype or Real Game Changer? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Oil: What lies ahead... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

The slow road to recovery

Testing the industry

12 4

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 O n e 2 010

“A lot of people take it as a given that the lubrication is okay and that we know a lot about it, and that’s not necessarily true.” page 28

Columns

Base Oil: The slow road to recovery . . . . . . . . . . . . 10 Automotive: Testing the industry. . . . . . . . . . . . . . . . . . 12

Sections Editor's Corner . . . . . . . . . . . . . . . . . . . . . 3 Contributors’ Page . . . . . . . . . . . . . . . . . . 6 Advertisers’ Index . . . . . . . . . . . . . . . . . . 42 Mallon and Costa join RohMax team . . . . . . . . . . . . . . . . . . . . . . 35 Infineum announces leadership team changes . . . . . . . . . . . . . . . . . . . . . . . 41

Naphthenics get from EU directive p18

boost

The ups and downs of sulfur

page

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

Q u a r t e r O n e 2 010

Contributors

Puckett

Thornton

Battles

Steve Puckett, based in Singapore, is managing director of TRI-ZEN International, oil and gas consultants. As vice president of the British Chamber of Commerce with responsibilities for corporate social responsibility (CSR) and as chairman of the Institution of Chemical Engineers, he is also a spokesman for the business community on CSR issues and the environment. 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. Hank Hogan is an Austin, Texas-based freelancer who writes about business, energy, technology and science. Like others in Texas, heâ&#x20AC;&#x2122;s sold exploration rights to an independent but a gusher hasnâ&#x20AC;&#x2122;t come in yet.

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 O n e 2 010

Hogan

Looye

Britt

Alec Battles is a freelance journalist who is currently based in Cyprus. He speaks Chinese, Arabic and Spanish. He reports on energy in the Middle East and Asia-Pacific. 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. Phil Britt is a veteran journalist who has spent more than 30 years covering various industries for magazines, newsletters, newspapers and online publications. He is based in suburban Chicago. Helen McMenamin is a freelance writer covering science, technology and business from Southern Alberta, Canada.

McMenamin

FE AT U R E

which had to be moved due to a zoning change, to the new site at Tianjin Lingang (Harbour) Industrial Park. However, this is no longer an issue so the Tianjin JV plant will stay where it is. The other JV plant is located in Lanzhou, which has intermediates and comby Vicky Villena-Denton ponent manufacturing and blending. Lanzhou is one of the key refining centers for PetroChina and the biggest refining center in northwest China. The investment plan will be supplemented by select debottlenecking projects and infrastructure improvements at existing plants in the United States and Europe. The US$5 billion specialty chemical company has two major global manufacturing hubs for its additives business segment. One is located in Deer Park/Bayport, Texas, U.S.A., with an annual capacity of 800,000 tons; the other is in Rouen/Le Havre, France, with an annual capacity of 200,000 tons. The original plan was put on hold due to the global economic recession, which resulted in uncertainty regarding demand. SINGAPORE—AFTER A TWO-YEAR manufacturing and blending. “The plant Lubrizol says that worldwide additive dewill phase in capacity only as needed for hiatus, Lubrizol Corp.’s Wickliffe, Ohio mand recovered significantly in the second those additive components projected to be half of 2009. The company says it expects headquarters announced in January that it of particularly short supply as we look at was now proceeding with a 10-year phased demand to return to pre-recession levels in our long-term forecast,” he says. “We are investment plan, originally announced in 2011 or 2012. In China in particular, “we also consulting with customers to under2008, to upgrade operations and increase expect demand to exceed this global averstand their needs and this will influence global capacity. age” of 1-2%, according to Phang. “Over the past five years we have stated our strategies as well.” The investment plays a significant part The new plant will be complementary that we would improve our financial rein Lubrizol Additives’ long-term global to Lubrizol’s existing joint venture (JV) turns in order to justify reinvesting in the manufacturing and supply chain strategy. with Chinese oil giant PetroChina, Lanbusiness,” said Dan Sheets, Lubrizol AddiChina is a high-growth market and an tives president. “By making these extensive zhou Lubrizol Lanlian Additive Co. Ltd. important one for Lubrizol. An increased investments, we are keeping our commitpresence through a wholly owned plant Tianjin ment to customers and ensuring that we allows Lubrizol to offer best-in-class techcontinue to be the most reliable supplier.” nology to the Chinese marketplace, which The centerpiece of the US$1 billion is growing not only in terms of volume but investment plan is a new, wholly-owned also in terms of technical requirements. greenfield plant in China, which has now The investment also “helps continue Lubeen relocated from a 150,000-square meter brizol’s progress toward meeting its overall site in the Tianjin Lingang (Harbour) Ingrowth objectives,” he says. dustrial Park in north China to a 400,000The last “big” investment in the addisquare meter site in the Zhuhai Gaolan Port tives industry was the Chevron Oronite Economic Zone in south China. The plant, plant in Singapore’s Sakra Island more than which is scheduled to break ground in late a decade ago. That plant, with a capacity 2010, will cost about US$200 million. of 135,000 tons, cost US$215 million when “The site location was altered in order it went onstream in 1998. Prior to Sakra, Zhuhai to improve access to shipping/transporthe industry has been shedding capacity tation channels for exporting2 products as demand growth in North America and “We are also consulting with Europe was stagnant. throughout Asia,” says Timothy Phang, general manager manufacturing, Lubrizol customers to understand their Over the past several years, however, adAdditives Operations-Asia Pacific Region, needs and this will influence ditive demand has been strong, especially in based in Singapore. There is a deepwater Asia-Pacific, resulting in tight supply. Lubriour strategies as well.” terminal and a container port in the inzol’s original investment plan was announced The original site in north China was dustrial complex about 11 kilometers away, on the back of a bumper year in 2007. about 20 kilometers from the Tianjin which is accessible by rail. “Right now our hub plants in Texas and branch of one of two JV plants. The Tianjin France are running at near capacity,” Phang The production capability of the plant serves as a blend plant and distribugreenfield plant will include select addisaid in mid-2008. Products from these tion point for lube additive packages. Orig- plants supply not only the Asia-Pacific retive components, eventually incorporating inally, the plan was to relocate the JV plant, gion, but also the rest of the world. driveline, industrial and fuel components,

Lubrizol resumes plan to build greenfield additive plant in China

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 O n e 2 010

Fuel Additives Refinery Additives Dyes & Markers

KeroLine™ – Your passion brand for fuel Everything we do at BASF, we do with passion. KeroLine™, our new umbrella brand for the petroleum industry, also bears this hallmark. KeroLine™ represents our well-known Kero brands such as Keropur®, Kerotect® and Keroflux®. These highly effective, tailor-made fuel and refinery additives as well as dyes and markers make your products and processes more efficient and environmentally friendly. KeroLine™ does not substitute our existing product portfolio. It stands for the unrivaled scope of our Kero products, offering you highest quality and a first class service. Feel relaxed. That’s what we call the KeroLine™ Effect.

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www.basf.com/keroline

BASE OIL COLUMN

FOB NE Asia

p Oc t No v De c

FOB Middle East

FOB Europe

FOB Baltic

FOB SE Asia

FOB NE Asia

p Oc t No v De c

Jan Fe b Ma r Ap r Ma y Jun Jul

2009 Base oil SN150 prices ($/MT)

$900 $800 $700 $600 $500 $400 $300

FOB Middle East

FOB Europe

FOB Baltic

2009 Base oil BS150 prices ($/MT)

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

$1200 $1100 $1000 $900 $800 $700 $600 $500

FOB SE Asia

slow road to recovery by Jeroen Looye

2009 Base oil SN500 prices ($/MT)

$900 $800 $700 $600 $500 $400 $300

Jan Fe b Ma r Ap r Ma y Jun Jul

The

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

FOB SE Asia

“The slow road to recovery,” continued on page 41 >>

p Oc t No v De c

Jan Fe b Ma r Ap r Ma y Jun Jul

$900 $800 $700 $600 $500 $400 $300 $200

CFR NE Asia CFR India 2009 Base oil SN150 prices ($/MT)

CFR NE Asia CFR India $1200 $1100 $1000 $900 $800 $700 $600 $500

2009 Base oil BS150 prices ($/MT)

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

HE BENCHMARK CRUDE, WEST TEXAS INTERMEDIATE OR WTI, started in 2009 at around US$45 per barrel. The poor economic environment pushed prices further down to US$35 per barrel in February. When sentiment in the financial markets turned and the economic outlook improved gradually, the early-cyclical character of crude oil was once again confirmed as prices rose to more than US$70 in June. After a correction to US$60 in July, crude oil resumed the upward move to more than US$80 in October. The first stage of the economic recovery is now well underway in 2010, but markets are starting to realize that economic growth is not nearly as strong as in 2007 when crude oil reached more than US$140 per barrel. On a fundamental basis, there is little reason to expect a substantial further price increase. On the contrary, most economic indicators point to a long and slow path to recovery. It is no surprise then that crude oil prices seem to fluctuate between US$70 and US$80 per barrel. Renewed price pressure can be expected in 2010 as the cyclical part of the economic recovery draws to an end, governments reduce their stimulus packages and final demand from the private sector disappoints.

FOB Europe

Jan Fe b Ma r Ap r Ma y Jun Jul

$900 $800 $700 $600 $500 $400 $300 $200

FOB Middle East

2009 Base oil SN500 prices ($/MT)

CFR NE Asia CFR India Source: www.baseoilmarket.com

10 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 O n e 2 010

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

Q u a r t e r O n e 2 010

AUTOMOTIVE COLUMN

TESTING

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

by Hank Hogan

the Industry

SAN ANTONIO, TEXAS—At the Powertrain, Fuels & Lubricants Meeting of the Society of Automotive Engineers (SAE) in November, there was a very brief presentation about chipping a small hole in the ice covering a windshield, and then driving by peering through that hole. GIVEN THAT THE OUTSIDE TEMPERATURE WAS ABOUT 25OC, THIS wasn’t something anyone in the room was going to do soon. But in some ways, this unsafe driving practice that gets one down the road via tunnel vision could be seen as a cautionary tale for those at an open forum on testing oils for engine endurance. Jerry Wang, original equipment manufacturer (OEM) and industry liaison with Chevron Oronite, based in Ypsilanti, Mich., U.S.A., chaired the forum. He explained that the purpose of the open forum “was strictly an exchange of opinions.” Thus, no immediate results or outcome should be expected, said Wang. On the whole, he deemed the meeting a success. “I think the forum went as well as it could and was well attended, based in comparison with prior open forums.” Panelists included representatives from OEMs, oil marketers, and additive companies, as well as those from bench and engine testing firms. The presentations, as well as the Q&A session afterwards, pointed out some looming problems and concerns, which were confirmed in later interviews.

12 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 O n e 2 010

One issue has to do with engine tests, which involve running an actual and specific engine under a set of given conditions. This approach is generally seen as more complex, less repeatable, more time consuming, and more costly than bench tests. However, engine tests are also often viewed as preferable to the alternative because they are a closer simulation to what happens in the field. They also capture the effects of combustion and other interactions. “Bench tests can lose the interaction aspects that exist in engine tests,” said William Buscher, manager of research and development in the engines research lubricants department of San Antonio-based Southwest Research Institute (SWRI). Naturally, engine tests have to run on actual hardware, which should be representative and available for a long time. That last point can be a challenge, as Buscher noted in a presentation that detailed supply problems with engines and components. Testing centers have had to contend with various difficulties over the years and overcoming such issues has involved considerable effort. Bench tests don’t face such problems and they offer other advantages, said another presenter, Michael Anderson. He’s vice president of the Sugar Grove, Ill., U.S.A.-based Falex Corp. For one thing, bench tests can offer a shortcut during initial evaluation. “Starting with bench tests helps to reduce the number of different fluids by pre-screening test results,” he said. Also, bench tests aren’t as likely to be phased out. The same can’t be said for engine tests. Indeed, many engine tests in both the U.S. and Europe are due for replacement in 2015. Since it takes three or so years for a new test to be developed, work on the next set needs to begin in 2011 or 2012.

“...the mission in life for everyone involved is to protect real hardware in the real world.”—Jai Bansal, Infineum global crankcase technology advisor This effort might need to begin even sooner, if an idea that surfaced at the open forum is pursued. Tests from both ASTM (American Society for Testing Materials) International in the U.S.A. and CEC (Coordinating European Council) are slated to be replaced at the same time, opening up an interesting possibility. “Testing the Industry,” continued on page 16 >>

R&D Facility Shanghai, China

R&D Facility Tsukuba, Japan

New Manufacturing Facility, Singapore

CUSTOMIZED ADDITIVE SOLUTIONS FOR ASIA PACIFIC CUSTOMERS, NOW DELIVERED FASTER We have committed to Asia Pacific region in a manner consistent with our vision – the commitment to help our customers establish a competitive advantage in their markets. Our investment in the Shanghai and Tsukuba R&D centres, the upcoming manufacturing plant in Singapore, and our full complement of local personnel, will better position us to offer customized solutions faster.

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Singapore 65-6732-0822 (Regional Headquarters)

©Afton Chemical Corporation is a wholly owned subsidiary of NewMarket Corporation (NYSE: NEU) 2009

FE AT U R E

by Philip Britt

S NATIONS ACROSS THE globe seek to reduce their carbon emissions, one of the major steps they are taking is to remove sulfur from fuels. According to The Sulphur Institute, based in Washington D.C., the major derivative of sulfur is sulfuric acid, the highest production volume chemical, which is used as an industrial raw material. The largest single use of sulfuric acid is for the manufacture of phosphoric acid, which is used to manufacture phosphate fertilizers and non-fertilizer phosphates. Sulfur and its derivatives are also used in metallurgical ore leaching and for other applications. The biggest change for permissible sulfur content in fuels in the last year was when China announced a reduced sulfur standard for diesel fuel of 150 parts per million (ppm), from 500ppm. Though the reduced amount is still far above the current standards for the U.S. (15ppm), Canada (15ppm), Japan (10ppm) and EU (10ppm), it is still a significant reduction, points out Ken Stern, managing director in the New York office of LECG, a global consulting practice. And while China, the United States and Europe have well defined standards for sulfur in fuels, in other parts of the world, especially in less developed countries, there are none.

14 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 O n e 2 010

“The impact [of low sulfur fuels] has passed in most of the developed world,” said Chris De Brey, supervisor of statistical services for the Sulphur Institute. “The world in general is becoming more environmentally conscious,” Stern said. For example, Brazil’s current standard for sulfur is 500ppm, but could follow China’s lead, which exerted major efforts in reducing pollution before the 2008 Olympic Games in Beijing. Brazil recently won the bid for the 2016 Summer Olympics. But while the trend is towards reducing the sulfur in hydrocarbon-based fuels, more of the crude oil coming out of the ground today contains higher levels of sulfur, according to Stern. Most of the recent oil discoveries contain higher sulfur, particularly in larger oil fields, such as the discoveries off West Africa by Anadarko Petroleum, the Gulf of Mexico find by British Petroleum and Petróleo Brasileiro S.A.’s (Petrobras) discovery in the Santos

Basin off the country’s southeastern coast. “There is ample incentive to get the sulfur out of the oil,” Stern said. “Outside of the environmental concerns, there are profit motives as well. There is a large and robust market for sulfur.” But the cost of sulfur in the world market can gyrate as widely as the price of crude oil. Sulfur that is taken out of fuels is primarily used in agricultural applications. The yield and quality of crops grown on sulfur-deficient soils are reduced unless sulfur is included in the fertilizer treatment. Sulfur fertilization also improves overall fertilizer efficiency. Sulfur is different than many other commodities in that it doesn’t conform to the same rules of supply and demand, according to Stern. “The supply is already dictated. They don’t try to increase supply to meet demand.” Having much more impact on the price of sulfur is the trend in agricultural

“There is ample incentive to get the sulfur out of the oil. Outside of the environmental concerns, there are profit motives as well. There is a large and robust market for sulfur.” —Ken Stern, LECG managing director

.41 ,$3 + /1.3$ "3(.- $$#2

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U.S. SULFUR PRICE HISTORY ($ PER LONG TON)

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT

ALBERTA M.T. FOB 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 0-5.00 0-5.00 5.00 5.00 6.00 (16.00) N/A (5.00) (5.00) (5.00) (5.00) (5.00) 16.00 27.50 27.50 27.50 27.50 27.50 27.50 27.50 27.50 27.50 27.50 27.50 23.00 23.00 N/A N/A (10.00) 20.00 52.00 140.00 390.00 600.00 600.00 50.00 (20.00) (20.00)

RECOVERED US-WEST HOUSTON COAST DEL FOB 1.00 50.50 0.00 50.50 0.00 50.50 0.00 50.50 0.00 58.00 0.00 58.00 0.00 53.50 1.00 48.50 3.00 43.50 3.00 43.50 2.00 43.50 0.00 49.50 0.00 49.50 0.00 26.00 0.00 0.00 0.00 18.50 0.00 26.50 0.00 30.50 0.00 36.50 0.00 44.00 0.00 48.00 17.50 56.00 17.50 52.00 17.50 55.00 17.50 55.00 14.50 55.00 14.50 51.00 14.50 49.00 14.50 49.00 25.50 49.00 25.50 54.00 25.50 60.50 21.00 60.50 21.00 54.00 21.00 54.00 13.00 46.00 1.50 41.50 18.50 47.00 71.00 70.00 100.00 98.00 375.00 238.00 570.00 438.00 570.00 603.00 100.00 135.00 (15.00) (15.00) (12.50) (10.00)

NOLA FOB 53.50 53.50 53.50 56.50 60.50 60.00 60.50 56.50 51.50 46.50 46.50 54.00 54.00 30.00 10.00 21.50 29.50 33.50 39.50 42.00 51.00 59.00 55.00 58.00 58.00 58.00 54.00 52.00 52.00 52.00 57.00 63.50 63.50 57.00 57.00 46.00 44.50 50.00 73.00 101.00 241.00 441.00 606.00 139.00 (11.00) (6.00)

FLORIDA CONTRACT DEL 64.50 64.50 64.50 67.50 71.50 71.00 67.50 62.50 57.50 57.50 57.50 N/A 62.50 42.50 27.50 32.50 40.50 44.50 50.50 58.00 62.00 70.00 66.00 69.00 69.00 69.00 65.00 63.00 63.00 63.00 68.00 74.50 74.50 68.00 65.00 60.00 55.50 61.00 84.00 112.00 252.00 452.00 617.00 150.00 0.00 5.00

SPOT TAMPA FOB 63.00 62.00 N/A N/A N/A N/A N/A 60.00 N/A N/A N/A N/A N/A 22.00 15.00 41.00 49.00 47.00 61.00 70.00 75.00 82.00 72.50 72.50 72.50 72.50 62.50 62.50 62.50 62.50 68.00 90.00 84.50 78.00 78.00 N/A N/A N/A 94.00 127.00 272.00 600.00 725.00 N/A N/A 20.00 Source: INTER-CHEM

>> “Testing the Industry,” cont. from page 12

“It makes sense for these two groups to consider if a new test could be developed that could meet the needs of both groups. As an example, Ford could possibly develop a new sludge and varnish test that could replace both the [ASTM] VG and the [CEC] M111 Sludge,” said SWRI’s Buscher. Development of any new tests should proceed carefully, cautioned Jai Bansal, global crankcase technology advisor for additive supplier Infineum USA of Linden, N.J. In his presentation, he noted that “... the mission in life for everyone involved is to protect real hardware in the real world.” Consequently, field tests are, in many ways, the best possible choice. Field testing, however, isn’t as convenient a tool for product development. Thus, 16 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 O n e 2 010

both engine and bench tests have been developed. While the connection of the first to the field can be relatively straightforward, that of the second can be more obscure. Sometimes, the connection is more to instrumentation than the field. Some viscosity-related bench tests, for example, are done at elevated temperatures because the instruments available at the time the tests were developed could only make the measurements at that temperature. Today, that constraint no longer applies but the tests have not been changed. Thus, instead of developing new tests for emerging needs, it might be better to examine existing tests for relevance and value. Whether developing new or refining old procedures, it’s important that bench tests not be done merely because they appear to correlate to some real-world

commodities. So in 2008, when commodities peaked in the summer, then crashed by the end of the year, sulfur prices did the same. According to the U.S. Geological Survey, high prices were driven by tight supplies that resulted from lower than expected production in the United States, owing to the processing of more low-sulfur crude oil than normal and unplanned outages at refineries. In other parts of the world, slow progress at new petroleum and natural gas developments and increased consumption at phosphate fertilizer operations, due to the agriculture boom, contributed to higher prices. “Sulfur got caught up in the whole commodities craze; then the bottom fell out,” De Brey said. “Usually the prices move [up or down] much more slowly. There isn’t usually something that causes the price to rise or fall a lot.” Prices, however, peaked in July of 2008 and then began to decline in October. The downturn was steeper than the rise. By the end of the year, some said the commodity could hardly be given away as the world economy took a turn for the worse. While that’s not quite the case, prices did crash below US$40 a ton by the end of 2008. Though prices rebounded somewhat during the first half of 2009, they fell again more recently. “I’ve never seen anything like that before,” Patricia Mohr, commodities analyst for ScotiaBank, in Toronto, Ontario, Canada, said of the price gyrations in 2008. Sulfur prices have leveled out at US$27.50 per ton in September, but were expected to increase in October alongside higher contract prices (US$40 per ton for the fourth quarter). She expects prices to go up further in the first half of 2010, but not at the same level as 2008.

phenomenon of interest, said Bansal. Instead that correlation should lead to further investigation. “The industry should automatically ask the next set of logical questions: Why does the correlation hold? What is the underlying mechanism of the real-world phenomenon that the test is interrogating and does that explain the observed correlation?” he said. No matter what eventually results, Bansal, like others, saw the San Antonio meeting as successful. He characterized the back and forth exchange among panelists and others as vigorous but professional, as well as necessary. “It is very healthy for an industry like ours to discuss issues of mutual interest in forums outside of the normal technical committees. I was very pleased to have been a part of it,” he said.

Only 22% of the worldâ&#x20AC;&#x2122;s total tire production is actually manufactured in the European Union (EU), but a new EU regulation, Directive 2005/69/EC, which took effect on January 1, 2010, is having global repercussions for the tire industry. by Alec Battles

Naphthenics get from

EU directive

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THINK THAT THE EU REGULATIONS DO not only have an impact for Europe, but also for the whole world,” said Markus Hoffmann, technical market support at Nynas AB, the largest producer of naphthenic base oils, based in Stockholm, Sweden. Traditionally, tires have been produced by using extender oils that may contain various levels of polycyclic aromatic hydrocarbons (PAHs). PAHs, which have been classified as carcinogenic, mutagenic and toxic to reproduction, are banned within the EU and other parts of the world. Originally drafted in Strasbourg, France, on November 16, 2005, 2005/69/EC prohibits extender oils from being used in the production of tires if they contain more than 1mg/kg of benzo(a) pyrene (BaP), a type of PAH, or more than 10mg/kg of the sum of all the listed PAHs. The directive covers passenger car, light and heavy truck, agricultural and motorcycle tires. Racing car and aircraft tires will be covered at a later date. These oils, which may make up as much as 28% of the tire tread, confer the essential characteristic of grip. If the tread does not work as intended, then safety and performance of the vehicle are compromised. Technically, the oils must be capable of dissolving the natural and synthetic rubbers and other materials used in tires, must be long-lasting and stable, must distribute well and remain bound in the rubber matrix, must function in different conditions of temperature and humidity, and must be safe to handle in manufacture and use. Highly aromatic oils, called distillate aromatic extracts (DAEs), which meet these specifications have traditionally been supplied by oil refiners. The required solvating power depends on the total aromaticity of the oils, which in turn depends on the presence of significant levels of PAHs. As the tread of a tire wears away, it is assumed that these PAHs are released to the environment. DAE oils have been widely used because they are readily available in greater quantity and are cheaper than alternatives. Per Dahlstedt, vice president of Nynas Group and head of Naphthenics, expects the tire industry to face major structural changes due to the EU directive. “About a million metric tons of aromatic extract will have to be replaced per year,” he said. “This chal is a highly demanding challenge for tire producers.” “I think that the EU Thus, refiners are regulations do not only forecasting a huge increase have an impact for in demand for naphthenic Europe, but also for the oils, which is one of three whole world.”—Markus alternatives to DAE oils. Hoffmann, Nynas AB market Thorsten Lutze, marketing manager at Nynas AB, technical market support said that the potential market for “labeled” tire process oils (“labeled” refers to any tire oil that must be marked as a hazardous chemical) in 2010 will be 300,000 tons, including DAE and other high aromatic oils, down from 1.3 million metric tons, as a result of the EU regulation. By comparison, the potential market for “unlabeled oils,” which will be the only legal option within the EU, will be about 1 million tons. Unlabeled oils include treated DAE (TDAE), mild extraction solvate (MES) and naphthenic oils. Not all tire oils are produced in the same way, said Nynas’ Hoffman. Some are refined from Group I base oils, utilizing side-

streams of fuel production, “a time-consuming and expensive process with only a few possibilities to steer the oil’s properties,” he said. Naphthenic oils are refined using hydrotreatment. “This technology really allows you to design products,” he said. “The big thing is the supply and the availability of these molecules around the world. Because tire companies act globally, what we are seeing with our clients in Asia is that, even though they only produce 5% of their tires for the European market, they are changing all of them to naphthenic oils, because it’s just not worth it for them,” he said. Asian countries currently consume around half the synthetic rubber produced around the world. Even though DAE oils are still allowed in some non-EU countries, the cost of keeping two parallel production lines and two separate storage facilities for labeled and unlabeled tire oils makes it prohibitive for most manufacturers to continue using DAE. When it comes to naphthenic oils, Hoffmann said that not all naphthenics are created equal. Since less than 3% of global crude oil reserves are naphthenic, the method used to convert the crude oil into usable naphthenic stocks is important. Severe hydrotreatment is an efficient way of getting the most use out of heavy-naphthenic crude oil, he said. “We do a vacuum distillation of the oil, and then different fractions of it go to a hydrotreatment facility. We use a catalyst to convert the aromatic systems into naphthenic systems. Any benzene molecules or bigger aromatic molecules get converted into naphthenic molecules,” said Hoffmann. “Just by our refining process, we get a very low count of polyaromatics. So, our standard techniques have really always had very ‘green’ oils,” he said. Because of the boost in demand for naphthenic oils, even China, which also happens to be the world’s third largest producer of tires, has entered the world of naphthenics. China National Offshore Oil Corp. (CNOOC), which is based in Beijing, and China’s largest offshore oil and gas producer, gets naphthenic crude from Bohai Bay in the northeast. CNOOC started developing naphthenic base oils in 2008, said Fu Yue, director of lubricant technology. Last April, “the first 500 tons of environment-friendly polycyclic aromatic rubber oil developed by CNOOC were put into market,” the company’s website proudly announced, making the company the first domestic supplier of this product. Fu said CNOOC is forecasting annual sales of 20,000 tons this year. CNOOC has an annual naphthenic base oil production capacity of 300,000 tons, but has plans to boost capacity further to 700,000 tons. Nonetheless, for CNOOC, naphthenic oils represent a “very small share” of the company’s business. Its listed arm, CNOOC Ltd., reported net income of 44.37 billion yuan (US$6.5 billion) in 2008, compared to Nynas, which reported a net income of 355 million SEK (US$49.1 million).

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T wo

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IS THERE A FUTURE FOR ILSAC? By Kelly Thornton

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COV E R

S TO RY

THE SEQUENCE VID, WHICH IS ONE OF THE NEW engine tests in the recently approved ILSAC GF-5 gasoline engine oil specification, is based on a more modern engine design, the 3.6 liter GM V6, to better reflect the types of engines now on the road. The test is expected to provide a 0.5% fuel economy improvement over previous standards. Until recently, U.S. automakers have sponsored standard lubricant engine tests for use in engine oil performance standards issued by a committee known as the International Lubricant Standardization and Approval Committee or ILSAC. ILSAC is comprised primarily of U.S.-based automakers General Motors Corp. (GM), Ford Motor Co. and Chrysler Group LLC, as well as the Japan Automobile Manufacturers Association (JAMA). However, test development is actually done by all stakeholders, including oil and additive companies, as well as test labs. For the first time, an â&#x20AC;&#x153;industry consortiumâ&#x20AC;? approach was used to fund the Sequence VID fuel economy test, in which each participant paid US$300,000. Ford and GM participated in the development of the Sequence VID, but Chrysler was not part of the consortium. Chrysler declined to comment about its lack of participation. The consortium included, besides GM and Ford, oil companies ExxonMobil, Chevron and Shell and additive companies Afton Chemical, Infineum, Lubrizol, Chevron Oronite and R.T. Vanderbilt.

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Perhaps the most potentially problematic issue for ILSAC is the fact that one of its key stakeholders, GM, has developed its own engine oil specification, called dexos™, which the company says will be applied globally to all of its 2011 model vehicles. GM’s new spec is intended to promote fuel economy and to streamline its numerous in-house specifications. Oils meeting the dexos™ specification will likely meet GF-5 specifications, but GF-5 oils might not meet dexos™ specs, industry insiders say. Motor oils meeting the dexos™ specification are expected to be about 30% more expensive than GF-5 oils. It’s unclear how dexos™ will co-exist with GF-5, and that has some people nervous on a number of fronts, including worries that it might not bode well for ILSAC. “Clearly there are questions being raised about dexos™. If it is successful and the other auto companies were to follow GM’s lead, it basically says ILSAC is, at that point, not necessary, at least from the automakers’ perspective,” said Jeff Leiter, legal counsel for the Independent Lubricant Manufacturers Association (ILMA), which is a trade group of mostly U.S.-based independent blenders. ILMA members include about 140 manufacturers who account for about 30% of the U.S. engine oil market. Industry insiders are speculating that GM is trying to generate revenue from dexos™. Each dexos™ viscosity grade (there are four) will require a separate annual license fee of US$1,000 each and the payment of either a US$0.36 per gallon royalty for licensed products or a “lump sum” for all licensed products. The final price tag for the Sequence VID was US$3.4 million. GM declined to comment, except to exAutomakers provided about US$1 million of in-kind testing, rath- press support for ILSAC and to note that the er than cash. Test labs Intertek Automotive Research and Southcompany has had its own specifications for west Research Institute also made in-kind contributions. years. The implication was that dexos™ doesn’t change anything. Some industry observers see the move to share the financial “Since the early 1900’s, GM has had its own engine oil speciburden amongst stakeholders as a sign that the future of ILSAC fications so refining and improving our specifications isn’t necescould be in question, as the global economic recession took its sarily anything new,” Spokesman Tom Read said. toll on American, as well as Japanese, automakers. However, with the introduction of dexos™, the motor oil mar“For previous ILSAC specifications, an automaker ket of the future could mean segmented specifications. Ford proposed an engine test for consideration in the and Chrysler have said they will continue to support ILSAC specification. This time a consortium was formed to performance standards. If dexos™ is financially successful, pay for development of a test,” said Kevin Ferrick, however, that could change. manager of the American Petroleum Institute’s Leiter said GM has written a letter of support (API) engine oil licensing and certification to ILSAC saying, essentially, “we’re still with you.” “ILSAC program. “That by itself was different. We “GM has indicated at least publicly they GF-5 is went from an OEM [Original Equipment support ILSAC, although people in the inintended to Manufacturer] bringing forward a dustry are questioning just how strong provide improved test to a joint industry consortium that support is and how long that may fuel economy and agreeing to develop a test.” remain strong,” Leiter said. “If GF-5 greater emission system Money problems are is not equivalent to dexos™, while protection, ensure compatibility just one of the challenges GM says it supports ILSAC, the with engine seals, and help being faced by ILSAC since question becomes for how long? protect engines when it was formed in 1987 by the And if the other companies decide to operating on ethanolMotor Vehicle Manufacturers follow GM’s path, I think ILSAC is efcontaining fuels Association (MVMA), which is now fectively neutered at that point.” up to E85.” known as the Alliance of Automobile Like GM, Ford and Chrysler said Manufacturers (AAM) and JAMA. they support ILSAC even though they may AAM and API jointly manage the have their own in-house specifications. implementation of ILSAC standards. Ford Spokesman Todd Nissen said, “Ford

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remains committed to ILSAC. It provides an excellent minimum standard that oil marketers can follow which in turn provides proper engine oils for our customers.” Said Chrysler Spokesman Nick Cappa: “As a company Chrysler Group LLC feels that ILSAC makes a significant contribution to assuring that high quality engine oils are broadly available to our customers…Chrysler has always maintained our own specification also (MS-6395). MS-6395 includes engine oil validation testing that is very important in assuring that engine oil will protect our engines. Chrysler requires the use of ILSAC engine oils which also meet the requirements of MS-6395.” Industry insiders said that although GM and Chrysler have had in-house specifications, none has been as comprehensive as dexos™, nor have in-house specs been licensed for outside use, which GM apparently plans to do at a higher rate than typical specs. Dexos™ is apparently the first high-volume specification in North America that is not based on ILSAC or API specs. “Dexos shares some parts of GF-5, but it also has differences,” said API’s Ferrick. API licenses oils, including those that meet ILSAC standards. “It’s unclear how GF-5 will work with dexos™. We don’t know that at the moment.” The timing on GM’s spec, which was formerly known as GEOS, is almost identical to that of GF-5. First licensing for GF-5 is October 1, 2010. However, effective January 1, 2010, oils meeting the GF-5 minimum performance standard may be licensed as GF-4. ILSAC has plenty of vocal supporters including ILMA and API. So far, ILSAC has developed five gasoline engine oil specs since it was formed, beginning with GF-1 in 1993, followed by GF-2, GF-3 and the current standard, GF-4, which was introduced in 2004. The latest standard supersedes the previous one. Better fuel economy and lower emissions are the key drivers for GF-5. “As long as our individual “I think the companies are willing to idea is that the auto send us to these meetings companies know that the oils that will be we’ll be there. And as long as used to service their cooperation continues and vehicles have to be somebody doesn’t get bent out there and have out of shape and take their to be of sufficient ball and go home, nothing’s quality to meet our going to happen.” requirements,” said Jim Linden, who retired from GM in October 2009 and as a result, stepped down as ILSAC chairman. “We are willing to man those projects and cover whatever expenses are necessary to make that happen. GM has been extremely committed for many years on this and I don’t see it going away,” he said. Some ILSAC participants said they are confident the committee will survive the near-collapse of the American auto industry. “The only reason it would dissolve is if all individual members decide it wasn’t really worth continuing but that

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ENGINE TEST REQUIREMENTS A. Wear and Oil Thickening: ASTM Sequence IIIG Test, ASTM D7320 150 maximum Kinematic Viscosity Increase @ 40°C, % 4.0 minimum Average Weighted Piston Deposits, merits None Hot Stuck Rings 60 maximum Average Cam plus Lifter Wear, μm B. Wear, Sludge, and Varnish Test: Sequence VG, ASTM D6593 8.0 minimum Average Engine Sludge, merits 8.3 minimum Average Rocker Cover Sludge, merits 8.9 minimum Average Engine Varnish, merits 7.5 minimum Average Piston Skirt Varnish, merits 15 maximum Oil Screen Sludge, % area Rate and report Oil Screen Debris, % area None Hot Stuck Compression Rings Rate and report Cold Stuck Rings Rate and report Oil Ring Clogging, % area C. Valvetrain Wear: Sequence IVA, ASTM D6891 Average Cam Wear (7 position average), μm

90 maximum

D. Bearing Corrosion: Sequence VIII, ASTM D6709 26 maximum Bearing Weight Loss, mg E. Fuel Efficiency, Sequence VID, ASTM D7589 SAE XW-20 viscosity grade: 2.6% minimum FEI SUM 1.2% minimum after 100 hours aging FEI 2 SAE XW-30 viscosity grade: 1.9% minimum FEI SUM 0.9% minimum after 100 hours aging FEI 2 SAE 10W-30 and all other viscosity grades not listed above: 1.5% minimum FEI SUM 0.6% minimum after 100 hours aging FEI 2

doesn’t look like that’s going to happen in the near future unless we all start disagreeing too much,” said Ron Romano, a service lubricants technical expert and Ford’s representative on ILSAC. “We’ve been in economic troubles for a number of years now and ILSAC hasn’t dissolved. “Its not like it’s funded by anything,” Romano added. “It’s just lubricant engineers from each company getting together and putting together the specs. As long as our individual companies are willing to send us to these meetings we’ll be there. And as long as cooperation continues and somebody doesn’t get bent out of shape and take their ball and go home, nothing’s going to happen.” Just the question of ILSAC’s future was so politically sensitive that many companies declined requests for interviews for this story. Likewise, the big automakers’ public relations people who did take questions answered very few of them, and offered lots of “no comment” responses. One lubricant expert gave an interview in which he expressed mostly optimism about the future of ILSAC. He called back a few days later, saying his company asked him to pull out of the story. He said, “I think I will stay out of this one.” Perhaps one of the reasons ILSAC might survive and live on to bring another future spec to life is if the Japanese automakers take the bull by the horn, so to speak, and take on a more active role in test development. Financially, most Japanese OEMs are in better shape than their American counterparts. And while so far, they have been mostly passive participants, there arises the possibility that they could take on a more active role in the near future.

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Greasing the path to the future True to its proclaimed status as a technology leader, U.K.-based Ricardo plc has decided to help the future arrive more easily than it might otherwise. by Hank Hogan

THE COMPANY, WHICH IS BASED IN SHOREHAMby-Sea in West Sussex, has announced plans for a lubricants consortium. The organization will do pre-competitive research, with the goal of circumventing some of the problems foreseen with the more fuel-efficient and less polluting engines of the future. Craig Goodfellow, project director for fuels and lubricants at Ricardo’s Shoreham Technical Centre, heads up the effort. He reported that the initial two meetings of interested parties took place in late October and early November, with the first for those concerned about light-duty (LD) engines and the second for those involved with heavy-duty (HD) engines. “We have decided to launch two modules simultaneously, the first focused on LD gasoline and diesel engines and the second on HD diesel,” explained Goodfellow. “The focus for the first two modules will be on how the challenges to meet future emissions will impact lubricant performance, particularly where NOx control is tackled in-cylinder.” Two additional modules are being planned. One will focus on enabling ultra-low viscosity lubricants and the benefits of friction reduction on fuel consumption. Another module will

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examine lubricant effects on emissions and aftertreatment performance in future engines. Goodfellow declined to say who had attended the initial meetings, citing the desire for confidentiality by some of the participants. He noted that companies from North America, Europe, and Asia had expressed interest. “At the moment, all I can say is that we have a selection of OEMs [original equipment manufacturers], oil companies and additive companies engaged.” The response, he added, has been strong and so the consortium is likely to proceed, although no firm timetable for future actions has been announced. For now, the primary funding mechanism will be directly from the companies involved. Each company can join the consortium and only fund those modules they are interested in. Goodfellow noted that other sources of funding, such as from governments, would be considered, given the right context. Research consortia, involving a number of automotive companies, have been around for decades, according to Steve Przesmitzki, who is with the U.S. Department of Energy’s (DOE) Office of Energy Efficiency and Renewable

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

As for what the new consortium might work on, Ricardo’s Goodfellow listed four broad challenges. These arise from downsized and more fuel efficient engines, as well as the implementation of biofuels and lower exhaust emissions. Because they will be smaller than today’s engines, tomorrow’s powerplants will probably run higher cylinder pressure and place greater loads on engine hardware. From a lubricant perspective that means that high levels of wear protection and low friction have to be maintained, despite the harsh environment, and without adversely impacting how often the lubricant has to be drained and changed. Further down the road lies the possibility for even more pressure on lubricants, said Goodfellow. “In the case of highly downsized engines we could expect sump temperature to increase somewhat compared to today’s levels. This can lead to more lubricant oxidative stress.” As for the next area, increasing fuel efficiency will likely demand low viscosity lubricants. Studies have indicated that substantial improvements are possible, said George Fenske, section manager of the tribology group at Argonne National Laboratory in Argonne, Illinois, U.S.A. “By reducing both the viscosity as well as by going to low friction components, you can obtain savings of 3-5% in the overall fuel economy.” That’s roughly the same figure cited by Brian Crichton, industry liaison manager for additive maker Infineum International Ltd. of Milton Hill, U.K., in an interview given to an in-house Ricardo publication. Getting the full fuel savings will require a host of changes, including co-development of lubricant and hardware, he said.

Energy. He is currently fuels and lubricants technology manager of DOE’s Vehicle Technologies Program. Unlike Ricardo’s, however, current efforts are focused on specific parts of the lubrication problem. A Ph.D. graduate of the Massachusetts Institute of Technology (MIT), he said one such research consortium is based at MIT. There, the emphasis is largely on design. Thus, another consortium and additional research may be necessary, he said. If such work isn’t done, lubricants may not be ready when needed, Przesmitzki said. “A lot of people take it as a given that the lubrication is okay and that we know a lot about it, and that’s not necessarily true,” he said.

“A lot of people take it as a given that the lubrication is okay and that we know a lot about it, and that’s not necessarily true.”—Steve Przesmitzki, U.S. Department of Energy’s (DOE) Office of Energy Efficiency and Renewable Energy

Ricardo Shoreham Technical Center in West Sussex, U.K.

With regard to the third challenge, biofuels present a particular problem for diesel engines utilizing an incylinder, post-injection strategy to regenerate a particle filter, said Ricardo’s Goodfellow. Fuel in oil dilution is a key concern for OEMs and the way to tackle this problem is not fully clear. Thus, research and development in this area is needed. Finally, reducing exhaust emissions further will require more efficient aftertreatment systems. The desire here is to reduce lubricant consumption and ash deposition while minimizing any adverse impact on aftertreatment systems over the life of the vehicle.

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Hype or Real Game Changer?

Despite all the hype about algae as fuel, the question boils down to one thing: how long will it take to scale up demonstration projects and bring production costs down to make it competitive with fossil fuels? by Helen McMenamin

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URTIS RICH, WHO HEADS THE POLICY group at the energy, environment and infrastructure law firm, Van Ness Feldman in Washington, D.C., says all the 25 or 30 companies in the field are venture-funded, with most at the formative stages with only seed capital. “From the people I talk to, algae sounds like it is still many years from being commercially viable as a source of alternative fuel. A lot of the work is really basic science at this point,” said Luke Timmerman, national biotechnology editor of Xconomy, an internet-based technology news service. Most of the activity seems to be happening in the United States and some say they expect to ship significant quantities of algae fuel in a few years. San Diego, Calif.-based Sapphire Energy, which supplied algae-based jet fuel for the Continental Airlines and Japan Airlines biofuel test flight last year, claims it can produce one million gallons of fuel by 2011 and 100 million gallons per year within eight years. Perhaps the most high-profile of all the companies competing in this field, Sapphire Energy persuaded venture capitalists to invest US$100 million in the company last summer. It has the backing of Microsoft’s Bill Gates and the Rockefeller family. The company also received a US$50 million grant from the U.S. Department of Energy and a loan guarantee of US$54 million from the U.S. Department of Agriculture last December. Sapphire is expanding its 100-acre research facility in New Mexico to a 300acre integrated algal bio-refinery that will produce one million gallons of green crude next year.

“Fuel from algae is not just a laboratory experiment or something to speculate on for years to come. We’ve worked tirelessly, and the technology is ready now,” Brian Goodall, Sapphire’s vice president downstream technology, was quoted in a recent article. “We’ve successfully tested our fuel with two commercial airlines and within the next three years we’ll be producing enough to help meet the growing demands of industry and the military.” Another California-based firm, Aurora Biofuels, in Alameda, predicts that it will bring down the price of biodiesel from algae to US$1.30 a gallon by 2013. The company has successfully operated a pilot facility that has consistently produced algae biomass since August 2007. Currently, Aurora is developing a 20-acre demonstration plant that will begin commercial production in 2012. Algae are primitive organisms that include at least 30,000 species from seaweeds to pond scum and live in fresh, salt water or even wastewater. Microalgae, simple plants, generally around 5 microns across, are the most efficient plants in the world, capable of doubling their volume in a culture in a single day or even less. Like land plants, algae use sunlight energy to build carbon dioxide (CO2) into food reserves—oil and carbohydrates. However, they are more efficient (3 to 6% compared to a maximum of 1% for land plants). Oil can make up 70% or even more of dry algae biomass, but levels around 30 to 50% are more common. Algae can produce up to 15,000 gallons of oil per acre per year, compared to 650 gallons for palm and 50 gallons for soy. The remaining biomass has no fiber, but has high protein and carbohydrate levels. It can be used as high quality feed for fish, chickens or pigs. Carbohydrates can be easily extracted and used

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for ethanol production or other uses. Some species of algae also produce substances used as nutritional supplements. To grow fast, algae need more CO2 than is available in the atmosphere or seawater. The additional CO2 can be supplied as flue gases from cement plants, power stations or ethanol plants, reducing their carbon footprint dramatically. Some companies are focusing their near-term business plans on this aspect of algae culture. The most efficient species can absorb 50 to 60 g CO2 per square meter per day. Open ponds are the least costly of algae production systems, but it’s difficult to maintain temperature, pH and salinity levels. Also, the sunlight the algae need only penetrates about an inch into the culture and it’s easy for competing algae strains and creatures that feed on algae to contaminate and take over the culture. The alternative—closed systems—can be very costly. Scale-up problems have defeated many efforts, including a Japanese program that cost about US$117 million before it was abandoned in the 1990s. Harvesting microalgae is also a challenge. Efforts to date have precipitated the biomass with centrifuges or used chemicals to flocculate it. Both are costly, particularly in open ponds, where cultures are much less dense than in photobioreactors. Despite the challenges, about 100,000 tons of algae are cultured annually for nutritional supplements and pharmaceuticals. The challenge is to enhance oil production and lower costs. Among the companies developing special strains of algae and new processes for biofuel, a few have reached the pilot plant stage and several have attracted investment from major oil companies. Shell has set up a joint venture company, Cellana, with HR Biopetroleum, one of the groups that have worked the longest to develop oil production from algae. Cellana has a 2.5hectare pilot facility on the Kona coast of Hawaii, producing oil from algae in seawater, and is working on demonstration and commercial plant designs.

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The technique developed by HR Biopetroleum uses photobioreactors, long plastic tubes containing seawater and plant nutrients, to increase the population of algae. Under those conditions, the algae grow fast, but contain little oil. Then, the culture solution is released into shallow open canals that form ovals, like a racetrack with paddlewheels, to mix the culture and circulate it slowly through the raceways. In open canals, nutrients are limited, thereby exposing the algae to environmen-

“It’s all about making oil cheaply by taking advantage of the very high efficiency of algae in converting sugar to oil. For a low-cost commodity, the industrial chemistry is all about efficiency—what you get and what you have to give up.”—Harrison Dillon, Solazyme scientific co-founder tal stress which makes it produce more oil. Each batch of algae is harvested after about 72 hours, when oil and astaxanthin, a food and feed supplement and coloring agent, reach their peak levels. The oil is then extracted and converted to biodiesel. The system of producing rich cultures of algae in the closed systems protects young cultures from contamination, especially with tiny shrimps that feed on the

algae and can reproduce so fast that the algae colony can be destroyed. Cellana has a network of algae specialists at universities in Hawaii, Canada and the mainland U.S., screening some of the 300,000 or more algae species to find native strains that suit particular environments. The company is determined to use only unmodified strains of species that, in the event of escape, would not harm the local ecology. PetroAlgae Inc., has a demonstration plant in Florida using open ponds to culture oil, producing “micro-crops,” its term for algae, blue-green algae and/or tiny flowering plants, such as duckweeds, that float on the water surface. It does not use specific species, but collects local species and applies its technology to increase their productivity. PetroAlgae claims its techniques produce more biomass per square meter than any other system. The company uses a continuous harvesting system and extracts protein from the biomass. The remaining lipid- and carbohydrate-rich meal is sent to a conventional oil refinery. The high-protein material is sufficiently valuable to cover the cost of the plant, allowing the biofuels, which PetroAlgae Chairman John Scott refers to as “real diesel, real gasoline, real jet fuel,” to compete with fossil fuel at any price. PetroAlgae has licensed its technology to Indian Oil Corp. and will supply equipment to mitigate CO2 emissions from 10 facilities in China and Taiwan. Aurora Biofuels is breeding salt water algae that yield high levels of oil in its swimming pool-size open pond. It has adapted a wastewater treatment technology to harvest algae without drying it, making its process more efficient. Rather than selecting a species that produces oil, Algenol, in Bonita Springs, Fla., uses blue-green algae that synthesize carbohydrate and also have an enzyme that ferments sugars to ethanol, which it releases into the culture. The non-toxic algae can also fix atmospheric nitrogen (N2) to produce protein. Most algae and

land plants need nitrogen in the form of ammonium or nitrate, which are generally produced using natural gas, increasing the carbon footprint of algae fuel production. Conventional fertilizer nitrogen is also contaminated with heavy metals, which can be an issue in algae culture. Algenol uses a special membrane to continuously separate ethanol from the culture. The company claims an energy balance of 5.5:1 for its system of tubular bioreactors at a demonstration site in Mexico. It has a partnership with Dow Chemical to provide ethanol as a feedstock to manufacture plastics and other chemicals. It claims that its Direct to EthanolTM technology is “the only end-to-end commercial process that stabilizes and reduces CO2 levels.” The process converts a ton of CO2 to 60 to 70 gallons of ethanol, capturing 90% of the greenhouse gas. Solazyme Inc., in South San Francisco, Calif., has taken a high-tech approach to algae cultivation, growing algae in fermentation tanks, much like those used for yeast and bacterial fermentation processes. The algae are provided with sugar, currently from cane, but other sources could be used. “Feeding the algae with sugar makes the system 1,000 times more productive,” says Harrison Dillon, scientific co-founder of Solazyme. “It’s all about making oil

cheaply by taking advantage of the very high efficiency of algae in converting sugar to oil. For a low-cost commodity, the industrial chemistry is all about efficiency— what you get and what you have to give up. Our goal is oil for diesel in the US$60-80 a barrel range and we’re not far off that, although, as you get costs down, every dime in savings is harder to achieve.” The company claims that by optimizing algae genetics and culture conditions, it achieves oil contents of more than 75% of dry biomass weight. Solazyme has developed algae that tolerate high levels of oil and produce specific fatty acids for particular purposes. They have produced specialized oils for cosmetic and food uses, as well as for feedstocks for plastics, diesel and aviation fuel. It is working on developing organisms that produce longer chain lipids for lubricants. The oil is refined by the same processes as fossil fuel. Aviation fuel may be the first niche market for algae oils. Most other biofuels gel at altitudes of 30,000 feet and more, where temperatures drop below -40 o C. Also, most biofuels have significant oxygen content, which adds weight without providing energy, an important consideration for aviation, where fuel weight lowers payloads. Recently, Solazyme

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signed contracts with the U.S. military to supply 100% algae fuel. Synthetic Genomics, a La Jolla, Calif. lab-based company has attracted attention because it is run by Craig Venter, who led the program to sequence the human genome and pioneered automated DNA (Deoxyribose Nucleic Acid) analysis. DNA makes up the double helix that is responsible for our genetic coding. Synthetic Genomics has used the technology to identify more than 20 million genes in microbes in

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the oceans and is now working on developing algae species or engineering synthetic species that will use sunlight and CO2 to produce oils faster and more efficiently than is possible at present. The company has developed algae strains that produce and excrete lipid continuously, making the costly and time-consuming harvest of algae unnecessary. In July 2009, ExxonMobil Corp. committed up to US$300 million to Synthetic Genomics for research and development of algae biofuel production.

Seeing the greatest potential for algae biofuels in urban areas, Los Angeles, Calif.-based OriginOil Inc., has developed a “helix bioreactor,” a tank with rotating arrays of colored lights that emit light at wavelengths matched to the algae’s needs for photosynthesis. Each region of the tank receives intermittent light, which is sufficient for continuous photosynthesis. OriginOil has also developed a highpressure injection technique to mix nutrients and CO2 in the culture as microbubbles that persist for about three minutes, which it claims encourages faster growth. The company currently produces oil at the equivalent of US$8 a gallon. Several companies are working to produce oil from wastewater at sewage treatment plants. They have had some success, but the ability to remove nutrients, particularly nitrogen and phosphorus from the water before it is released, is as valuable as fuel production. At the other end of the technology spectrum, LiveFuels Inc., in San Carlos, Calif., is testing feeding minnow-sized fish on algae, harvesting the fish and extracting oil from them. They speculate that fish in an enclosure could be fed on wild algae that bloom in high-nutrient areas, causing ocean dead zones. Seattle, Wash.-based Bio Architecture

Lab is collaborating with chemical giant DuPont to make biofuels from ocean seaweed. The idea is to engineer microbes that can live entirely on seaweed. The hope is that these microbes will efficiently convert that fast-growing, renewable source of biological material into fuel and chemicals. The project is still in the R&D phase, however, and isn’t proven to deliver low-cost fuel in commercial scale.

There is optimism that algae could be the fuel of the future. Perhaps indicative of its potential, the U.S. Department of Energy has invested about 18% of its biomass budget in algae projects, about the same amount as its budget for solar technologies. Nonetheless, there is optimism that algae could be the fuel of the future. Perhaps indicative of its potential, the U.S. Department of Energy has invested about 18% of its biomass budget in algae projects, about the same amount as its budget for solar technologies. And the passage of bills in the U.S. Congress that propose to include oil from cultivated algae and related plants in the definition of advanced biofuels eligible for a subsidy of US$1.01 per gallon could further accelerate the already hectic pace of development in this industry.

Mallon and Costa join RohMax team Mallon

depth. He holds a BS in Petroleum Engineering from Penn State and an MBA from St. Joseph’s University. Costa

Tom Mallon joined Evonik RohMax USA, Inc. during 2009 as global key account manager. He has completed a transitional period with his predecessor, Armand Bianchini, who retired last year, and is based in the RohMax Horsham, Phila., U.S.A., Regional NAFTA office. Mallon joined RohMax from Evonik’s pharma polymer business line, where he held the position of Regional Business Director. He brings with him strong leadership and business management skills, coupled with technical

Joe Costa joined Evonik RohMax USA, Inc. as senior account manager last November, bringing with him several decades of sales, marketing and technical experience in the lubricants industry gained at ConocoPhillips and PetroCanada. Costa is working through a transition period with Cheryl Budzinski, who retired at the end of last year. Joe is based in the Houston

area and brings with him a wealth of sales management expertise and technical skills coupled with in-depth industry knowledge and international experience. RohMax Oil Additives is a leading global supplier of high performance VISCOPLEX® lubricant additives and VISCOBASE® synthetic base fluids for use in automotive and industrial lubricants. The company forms part of Specialty Acrylics business unit of Evonik Industries AG (www. evonik.com). Evonik Industries is the creative industrial group which operates in three highly profitable, promising business areas: Chemicals, Energy and Real Estate. Evonik is a global leader in specialty chemicals, an expert in power generation from hard coal and renewable energies, and one of the largest private residential real estate companies in Germany.

4th Asia Bottom of the Barrel Technology Conference Euro Petroleum Consultants

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18 & 19 May, Parkroyal Hotel, Kuala Lumpur Now entering its fourth successful year, Asia BBTC is established as the only event capable of bringing you up to date with the latest economic and technology developments for upgrading crude oil residues including the modernisation of existing facilities, new equipment and catalyst innovations. With its expert speaker panel and unrivalled networking opportunities with key regional refinery management, Asia BBTC has become the industry standard for excellence and is the must-attend resid upgrading event for your calendar.

8th Asia Petrochemicals Technology Conference Euro Petroleum Consultants

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20 & 21 May, Parkroyal Hotel, Kuala Lumpur Refinery-Petrochemical integration will be high on the agenda at APTC: benefits and opportunities will be discussed and case studies from recent projects in Korea, Middle East and Europe will be presented. Leading solution providers and technology companies will present on their latest cost-effective strategies and products, and we will hear positive updates on new and ongoing petrochemical projects. Join us in KL to meet with the leading players in the Asian petrochemical industry.

Special rates for all Refinery & Petrochemical Plant Personnel!

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FE AT U R E

what lies ahead... by Steve Puckett

The global recession led to a dramatic collapse in the prices of oilâ&#x20AC;&#x201D; dipping from more than US$140 in mid-2008 down to US$40 per barrel and now is hovering at around US$70 to 80 per barrel, at least for the moment. Lower prices can be expected to continue for an extended periodâ&#x20AC;&#x201D;but for how long? The short answer is until the global economy recovers, but the story is far from simple and has many facets. The longer the recession lasts, the more new oil exploration and production projects will be slowed or deferred and the greater the prospect of tight supplies and the more severe will be the spike in prices once economic recovery kicks in. >>

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and an older drilling rig that used to cost more than US$200,000 per day can now be had for US$90,000. To those in the business this is not an unfamiliar story, where the higher levels of investment seen in the past five years followed more than 20 years of underinvestment in the industry. In the long-term, oil pricing fundamentals are driven by supply and demand growth, while in the short-term the socalled “above ground” factors, related to investment in infrastructure affected by influences such as the global economy, political tensions or freak weather conditions, can account for unpredictable and sometimes significant swings in prices. While there are a variety of views on how and when global oil supply is going to peak, there is no disputing that oil is a finite resource and that the time when true demand will outstrip production capacity is approaching. As this future point in time comes closer and is better understood, oil prices are set to climb upwards and become even more volatile. Outside of re-

QUESTION often asked of Tri-zen is where do the longterm prospects lie? Where is oil production and demand headed? What will be the impact of alternatives? The recent high oil prices resulted in very strong cash flows for both producing countries and oil companies. New investment chased all manner of exploration and production opportunities, many of these in Southeast Asia. The scramble to invest and easy access to funds led to a serious shortage of resources—both equipment and skills—and an associated surge in costs. Interested investors found it almost impossible to find an oil-producing asset, or prospect, that was anything less than fully valued. The higher prices and new technology opened up opportunities in what were previously considered marginally economic and remote prospects. The plunge in oil prices and the tightness in the financial markets have now brought the costs of exploration and production, except for in the deepest waters

GLOBAL: All oil liquids forecast Biomass to liquids BioDiesel BioEthanol Coal to liquids Gas to liquids Oil Shales Other oil sands Venezuela (La Faja) Canada (Athabasca) Usual oil BAU demand Less plastics Less US gasoline Less ROW gasoline Less Jet fuel Less Other Transport Less Heat & Power

130000 120000 110000

000s of bbls oil equivalent per day

100000 90000 80000 70000 60000 50000

MAX CASE SCENARIO Includes OPEC adds capacity from 2010. Includes refinery gain. BAU is average business as usual demand growth over the last 20 years —actual demand will be erratic.

40000 30000 20000 10000 0 1945

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such as offshore Brazil, down to nearly half the level they peaked at a year ago and orders for new rigs and other capital intensive equipment have all but dried up, while existing projects are being deferred. The cost of conducting a seismic survey that was priced at perhaps US$12,000 per sq km last year has dropped to just US$6,500 today

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1995

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Source: Energyfiles Ltd

cessions, the level of investment in both oil and in new technology for efficient alternative transport fuels will surge. Oil demand has been declining in the past year, in line with shrinking global gross domestic product (GDP) and the short-term outlook is for that decline to continue into next year. It’s no surprise

that there appears to be a widely held and comfortable expectation that a shortage in oil supply will not occur for many years and that technology, together with new sources of energy and advances in energy efficiencies, will significantly extend the day of reckoning. However this might be wishful thinking. While there is room to speculate on exactly how big the remaining oil reserves are and how long they might last, it is the production levels of the oil which impact supply and therefore pricing. Future production can be predicted with a degree of reliability. One company, Energyfiles of the U.K., provides reference information to many governments and companies and bases its data on thousands of bottom-up field and basin profiles— and the resulting future picture is far from comfortable. Simply put, oil production rates can be modeled and predicted in the short- and medium-term, but conversely resource assessments have little impact on when oil supply will peak, since most of the oil will be produced far in the future. Production from the world’s existing oil fields is declining at around 3% to 20% per year, depending on location and reservoir type. With all oil production at about 82 million barrels per day in 2008, this is a decline of perhaps four million barrels per day each year or the equivalent of current Saudi Arabian production capacity every three years. Although the forecast is for a short term oil ‘glut’ in the coming year or so, following the latest fall in demand and as new supplies appear from West Africa, Brazil and the Caspian Sea in particular, the mediumterm picture is for tightening supply as the 60 or so countries already past peak continue their inexorable decline. Oil reserves are getting harder to find and more costly to extract and the ability of the industry to find and develop such huge volumes each year is almost at an end; let alone its capacity to increase output to meet a new surge in demand. The Organization of Petroleum Exporting Countries (OPEC), including Iraq with its huge undeveloped accumulations, has several million barrels per day of spare capacity, but this is not capacity that will be instantly accessible. Meanwhile here in Southeast Asia, for reference, while there is much unexplored potential, oil production is expected to rise only modestly to a peak of just under 3.2 million barrels per

day in 2015, representing just 3.5% of global production at that time. The illustration on page 38 shows oil production reaching a plateau within a decade and shows the forecast contribution of alternatives. The scenario shown is a maximum case for the contribution from alternatives and assuming that the market will drive rapid investment in heavy oils and biofuels after the recession ends whilst OPEC brings on its spare capacity as fast as it can. If demand continues to steadily rise then alternatives will be incapable of filling the gap and reduced consumption across the board—from transport fuels, to power generation, to plastics manufacture—will be a necessity. Michael R. Smith, chief executive of Energyfiles, estimates that, with sufficient commitment, there is potential to reduce demand through improving energy efficiency over a decade by at least 10 million barrels per day, but only after the incentives of higher prices kick in. The rest has to

“If demand continues to steadily rise then alternatives will be incapable of filling the gap and reduced consumption across the board—from transport fuels, to power generation, to plastics manufacture— will be a necessity.” be through painful, recession-driven substitution into less effective and more expensive transport fuels and, of course, conservation, as has happened in 2008 and 2009. While oil prices have collapsed from their peak, they have fared better than many other commodities and the knowledge that oil is a finite and diminishing resource has led to continued investment interest. Some of the most aggressive investors so far have been the national oil companies from this region, particularly from

China and India. Increased acquisition activity from the international oil companies is expected, as is a wave of consolidation of the smaller and medium sized companies driven by the current financing challenges. It will come as no surprise that it is the Asian region where most of the global demand growth will emanate from. Whilst demand in the U.S. and Western Europe is expected to remain relatively flat, it is China and India that will lead the charge with Asian consumption of oil forecast to increase from 24 million barrels per day in 2008 to more than 30 million barrels per day in a decade. While there are differing views on how and when global oil supply is going to peak, there is no disputing that demand closed in on production capability when oil prices spiked in 2008 and it will do so again in the not too distant future. When this point in time eventually dawns again, the price of oil will surge once more.

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Infineum announces leadership team changes

Infineum International Limited, a major worldwide developer, manufacturer and marketer of lubricant and fuel additives, has announced a number of changes to its senior leadership team that will become effective February 1, 2010.

Struglinski

Kennedy

Mark Struglinski, currently vice president sales & marketing, will be appointed vice president technology. Assuming this role from Shaun Kennedy, who has elected to retire from Infineum as of January 31, Struglinski will continue to be based at the Linden Business & Technology Centre in Linden, N.J., U.S.A.

Russell

Trevor Russell will take on the role of vice president sales & marketing in place of his current position as vice president supply. Russell will also assume additional responsibility as chief strategy officer. He will remain based at the Milton Hill Business & Technology Centre in Abingdon, U.K.

Sara Lefcourt, now crankcase global business manager, will be promoted to vice president supply. In this role, Lefcourt will be accountable for manufacturing; health, safety and environment; process technology; supply chain and supply Lefcourt planning operations. She will continue to be based at the Linden Business & Technology Centre in Linden.

>> “The slow road to recovery,” cont. from page 10

In the first quarter of 2009, base oil prices continued to edge downwards as refineries continued to question whether production cuts would be able to curb the fall in base oil prices. The decline in base oil prices was not evenly spread among the continents. This opened the window for arbitrage to Asia. However, many traders were only interested in base oil parcels at exceptionally low levels. Several refineries decided to take their losses and sell out their inventories. This resulted in several trades in February/March from Europe and U.S. to India and China. India imported more than 210,000 metric tons of base oil in the first quarter of 2009. Strong demand from China was mainly caused by seasonal strengthening and inventory replenishment. As the demand for low-priced base oils continued from the Asian countries, prices bottomed out in Europe and the U.S. in the second quarter. Refineries reduced their operating rates for 2009 to 75%, like Motiva in the U.S, Kuwait Petroleum in Europe and ExxonMobil in Singapore. Other refineries (e.g., Agip in Italy, Cepsa in Spain and Lotos Oil in Poland) were taken offline for maintenance or even extended their shutdown due to poor economic conditions (e.g., Kremenchug refinery in Ukraine and Repsol in Spain). Tightening of supply conditions worldwide and the rise in crude oil prices resulted in a strong upward trend in base oil prices which started in May 2009. During the following months, prices kept rising up to US$730 per metric ton FOB Europe for SN500 in July. Free Membership

Real Time Base Oil Prices

Resistance to supply-driven price increases grew. Base oil markets couldn’t absorb them. Asian countries scaled back their activity in the markets and the window for arbitrages closed around the month of August. Many lubricant blenders expected the market to weaken due to the development in crude oil prices. This passive stance was also reflected in the produc-

The first stage of the economic recovery is now well underway in 2010, but markets are starting to realize that economic growth is not nearly as strong as in 2007 when crude oil reached more than US$140 per barrel. tion rates of lubricant producers. Nevertheless, large shipments of Group II base oils from the U.S., Korea and Taiwan were sent to India and China. During the last quarter of 2009, buyers’ attitudes remained cautious and prices were largely unchanged at around US$760 per metric ton FOB Europe for SN500 and US$725 per metric ton FOB Europe for SN150. Prices were around US$785 per metric for SN500 and US$730 per metric ton for SN150 FOB Asia. Prices of Group I base oil recovered at levels closer to the levels seen at the end of 2007-early 2008. Last year, market players were also more open to using Group II due to its competitive pricing. For example, SN500 (Group I) and N500 were both US$840 per metric ton FOB Taiwan.

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