See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/318310426

GTL The elephant in the room

Article  in  Lubes-n-Greases · May 2014

CITATIONS READS
0 259

1 author:

John Unsworth

34 PUBLICATIONS   706 CITATIONS   

SEE PROFILE

All content following this page was uploaded by John Unsworth on 09 July 2017.

The user has requested enhancement of the downloaded file.

 MAY 2014 VOL. 20 ISSUE 5

Tribology’s
Space Race
 MAY 2014 VOL. 20 ISSUE 5

TABLE OF CONTENTS
F E AT U R E S :
16 Honing the Peaks and Valleys. To stand out among
makers of engine cylinder bores and blocks, Dart
Machinery added keen precision and advanced
technology to the “black art” of honing.

24 Tribology’s Place Is Space. Rather than rely on Earth-

based tests and limits, the scientific study of friction,
wear and lubrication should aim for the stars, urges
Nikolai Myshkin.

Page 6 32 Brazil’s Surprising Strength. The country’s lubricants

market rose in volume by 8.3 percent in 2013, yet
GDP grew just 2.3 percent. Why such startling data?
Pedro Nelson Belmiro has answers.

40 GTL: The Elephant in the Room. Gas-to-liquids base

oils are a classic case of market disruption: damaging to
some, empowering to others, and well beyond the lube
industry’s control, according to experts at RPS Energy.

48 The Best Thing, Going? Automakers are satisfied that

low-phosphorus engine oils deliver the wear protection
they need. That’s cold comfort to the engine
rebuilders and car guys who want their ZDDP back.

Page 16

D E PA R T M E N T S :
3 Publisher’s Letter 60 Places’n’Faces

6 Automotive 68 Letters to the Editor

14 Need to Know 70 Advertiser Index

52 Best Practices 72 Base Oil Report

56 Product News 74 Your Business

Page 24

On the Cover: Astronaut Steve Bowen working to clean and lubricate

part of the International Space Station, in 2008 (NASA photo)

4 MAY 2014
 GTL: An
elephant
in the
room?
BY JOHN UNSWORTH, JOHN SARGEANT AND STUART SPEDING
T
hrough the turbu- fits. These results demonstrate that
lence of the past lubricants companies have been work-
few years, lubri- ing both sides of the profitability equa-
cants industry tion — revenues and costs. Yet in the
finances seem to days ahead, several factors in the mar-
have been remark- ket could alter the competitive environ-
ably resilient. Published results for mar- ment and upset profitability.
keters and suppliers have demonstrat- Gas-to-liquids base oils are a classic
ed robust health. As examples, you example of a market disruption: poten-
need only look at the pre-tax profits of tially damaging to some, empowering
Fuchs Petrolub, Ashland’s Valvoline to others, and ultimately beyond the
business, BP’s Castrol segment, Afton control of the lubes industry itself. But
Chemical and other publicly held out- how much of an impact will they make?
40 MAY 2014
The What and Where of GTL
GTLs are a great way to exploit “strand-
ed” natural gas, located in fields far
from markets and with no gas pipeline
network. The GTL process converts nat-
ural gas into a synthetic crude which
then can be further processed into a
wide range of liquid fuels and waxes. It
can produce a wide range of near-zero-
sulfur fuels (<1 ppm) including diesel.
And if another processing step is
added, it can convert waxy products
into API Group III+ base oils. With the

right economics, the products can be
produced in remote locations and
shipped to regional markets.
Until recently, manufacture of GTL
products was confined to one PetroSA
plant in Mossel Bay, South Africa, and a
Shell pilot plant in Bintulu, Malaysia.
During the 2000s, BP, ConocoPhillips
and ExxonMobil all planned and then
abandoned major GTL ventures.
However, Shell started up production
at its world-scale Pearl plant in Qatar in
2011, and soon ramped up to make
140,000 barrels a day of fuels and base
oils there. Sasol’s Oryx plant had begun
production of GTL fuels in Qatar even
earlier, in 2007. Now the $10 billion
Escravos plant in Nigeria (a joint ven-
ture of Chevron, Sasol and Nigerian
National Petroleum) is in the commis-
sioning phase.
Using Sasol’s proprietary Slurry Phase
Distillate process and having 33,000 b/d
of capacity, Escravos expects to be pro-
ducing by mid-year. So by the end of
2014 global GTL output (of all prod-
© donvanstaden - Fotolia
ucts) should total 13 million metric
tons per annum. GTL plants with inte-
grated base oil units can deliver a pre-
mium product slate, with synthetic base
oil, paraffin cuts and waxes amounting
to up to 30 percent of the output by
volume.
The base oil that is produced is of a
very high quality, with properties equal
to or better than Group III+ derived
from crude oil. And though relatively
insignificant in its impact on regional fuel
demand, Pearl’s 1.4 million tons of GTL
LUBES’N’GREASES 41
 Reported Annual Profit, pre-tax plant nearby in Louisiana which likely
will include base oils.
1,500
Driving the Decision
1,200 The thermal efficiencies of the GTL
process are relatively low, so natural gas
U.S. $ Million

feedstock prices must be low for GTLs to

900
600
300
0 struction costs.
Fuchs
2009
Source: Company reports
base oil capacity represents over 20 per-
cent of current global Group III supply.
As historically low natural gas prices
spur renewed interest in GTLs, another
wave of plant construction is beginning
to form. Current focus is on much
smaller GTL plants, which are quicker
to build, require much less capital and
can be deployed on much smaller gas
fields. There are three such projects
Valvoline BP-Castrol Afton Chemical
Lubricants
2010 2011 2012 2013
under way in the United States at pre-
sent. However in December, Royal
Dutch Shell judged that the record-low
natural gas prices in the United States
were insufficiently low or sustainable to
support a massive plant proposed for
Sorrento, La., even though it was
announced as recently as March 2013.
Nevertheless, South African energy firm
Sasol is still planning to build a GTL
compete with products from crude oil.
But GTLs also must compete with alter-
native uses for liquefied natural gas
(LNG).
There were steep declines in natural
gas prices from January 2011 to April
2012, with a slight rise in plant con-
Shell said their own escalating project
costs caused their change of heart in
Louisiana. Originally estimated at $12.5
billion, by the time the company with-
drew the price was said to be $20 billion.
But there are still significant margins
to be had for GTL fuels and an even
wider margin for base oil, versus current
prices for natural gas feedstock. Even
after adding in capital and operating
expenses, analysts at E-Meta Ventures
estimated that GTL Group III margins
easily would have topped $1,000 per
ton for much of 2011 and 2012.
Continued on page 44

GTL Projects: Completed, planned or discontinued

Company Location Capacity Completion date Comments

(000 tpa) or target
COMPLETED
PetroSA Mossel Bay, S. Africa 2,200 1993 No base oil; possible expansion of
600,000 tons by 2019
Shell Bintulu, Malaysia 700 1996 Revamp scheduled for 2015
Sasol-Qatar Pet. Oryx, Qatar 1,700 2007-08 No plans to make base oils
Shell-Qatar Pet. Pearl, Qatar 6,800 2011-12 Includes 1.4 million tons of base oil
Chevron-Sasol-NNPC Escravos, Nigeria 1,600 1H 2014 No plans to make base oils
ANNOUNCED
Calumet* Karns City, Pa., USA 50 2014-15 Base oils possible
Juniper** Westlake, La., USA 70 2015 No plans to make base oil
Pinto Energy* Ashtabula, Ohio, USA 140 2016 May make base oils
G2X*** Lake Charles, La., USA 600 2017 Fuels only
Sasol-Petronas- Oltin Yo’l, Uzbekistan 1,800 2018 No plans to make base oil
Uzbekneftegaz
Sasol Westlake, La., USA 4,700 2019-20 Could make base oils after 2020
DISCONTINUED PROPOSALS
ExxonMobil-Qatar Pet. Ras Laffan, Qatar 7,500 2011 Project changed to LNG in 2008
Shell Sorrento, La., USA 6,800 2020s Project abandoned Dec. 2013

*Velocys process **ExxonMobil process ***SGC Energia process Source: RPS Group Downstream

42 MAY 2014
 Continued from page 42
For Shell to walk away from such sig-
nificant margins suggests that there
were much wider considerations in play
than fuels and base oil margin capture.
Capital costs for an LNG plant can be
approximately 40 percent lower than for
a GTL plant, as David Whitby of
Pathmaster Marketing explained at the
European Base Oil & Lubricants Summit
in Budapest last September. When ship-
ping and other costs are taken into
account, and as opportunities increase
for LNG to be used as a transport fuel,
GTLs can face stiff competition for limit-
ed downstream investment funds. As
well, LNG schemes are generally more
cost-effective even against very large
GTL plants (2.5 million t/y and greater)
where GTL economics are most attrac-
tive. The critical criterion tends to be
whether the potential market can utilize
LNG for heating, electricity generation
or petrochemicals in sufficient volumes.
However stranded gas remains an
issue and there is increasing interest in
building small GTL plants where they
can give access to the thousands of small
gas fields containing less than 0.5 trillion
cubic feet. Although such GTL schemes
may be more expensive on a per-gallon
basis than larger plants, they may win
hands-down against LNG alternatives.
For Sasol, waxes are more valuable
products than base oils. Their planned
GTL plants are likely to produce mostly
high quality diesel, waxes and chemi-
cals, although the company says the
Louisiana venture someday could make
up to 9,000 daily barrels of base oils
after 2020.

Rising Competition
By contrast Shell has a number of
strategic options and advantages to
exploit. They are actively exploiting the
quality dimension by branding certain
GTL products (e.g. Risella X Top Tier
process oils; Ondina X medical white
Our PAOs can take the heat – oils; Diala S4 ZX-I transformer oils; and
and the cold. most recently, Pennzoil Ultra synthetic
motor oil made with “PurePlus” GTL
base oils). Shell could also choose to
turn their considerable base stock cost
advantage into sales.
Or, perhaps this oil giant will develop
a strategy based on both, and deliver a
differentiated top-quality offer at a com-
petitive price into the market. In any
scenario, against the increasingly com-
moditized and specification-led indus-
try, an advantage exists and also allows
Shell to have a strong proposition to
original equipment manufacturers. With
such strong marketing messages it is
Synfluid® PAO products are known as trusted problem solvers in the development of new and innovative
widely expected that they will continue
lubricants in a wide range of industries. Synfluid® PAO products’ carefully designed molecules allow you
to keep their GTL base stocks in-house.
to focus in on the specific performance properties needed for ever-increasing lubricant challenges. And On one level, the current 13 million
thanks to our new Synfluid® mPAO, we now offer a broader range of viscosities. Synfluid® products tons of annual GTL capacity and the fur-
give you more flexibility than ever to push the limits in extreme applications. ther 7 million tons of planned capacity
are a tiny contribution to the global
product pool, with little immediate
www.synfluid.com prospect of more plants coming forward.
synfluid@cpchem.com
We believe, however, that GTL-derived
base oils represent one factor, amongst
8 0 0 • 2 3 1• 3 2 6 0 several, which could create a tipping
Continued on page 46

44 MAY 2014
 Two Paths to Base Oil Continued from page 44
point towards markedly more competi-
tion across the lubricants value chain.
NATURAL GAS CRUDE OIL Even if Shell continues to reserve GTL
base oil for themselves, their 1.4 million
Synthesis gas CO +H2 Distillation tons amount to over 20 percent of a
global Group III capacity which is
already oversupplied and set to grow
Heavy paraffin synthesis Hydroprocessing significantly over the next few years.
Even if further GTL plants add little to
Group III+ supply, as currently fore-
Hydroprocessing Dewaxing
casted, a proliferation of small GTL
plants could provide incremental
Fischer Tropsch wax Slack wax Group III supplies.
So, is there an elephant in the room?
Base oil refiners may reflect that their
Catalytic isomerization ability to build and operate plants has
always depended on decisions dominat-
Dewaxing ed by fuels considerations. Now, with
GTLs, that dependence seems com-
pounded by judgments on long-term
GROUP III BASE OILS natural gas prices.
New GTL plants, alongside new
Source: RPS Energy Group II and Group III refineries,

46 MAY 2014
would further depress base oil prices,
and if they are capable of flexing their
base oil output they will add a further
uncertainty into the base oil price out-
look.
Lubricant marketers have seen sup-
plies of higher quality base oils rise in
recent years; price spreads between
Group I and Group III have narrowed.
It is becoming easier for smaller mar-
Stuart Speding John Unsworth John Sargeant
keters to access the raw materials need-
ed to blend premium products, which
can be critical to succeed in specifica- London-based Stuart Speding is direc- high-value, technical innovations and
tion-driven markets such as Europe. tor of Downstream Consulting at RPS launches such as Shell FuelSave and
With the right procurement and mar- Energy, which advises clients on all Shell V-Power Nitro Plus. Senior consul-
keting strategies, dynamic players stages of the lubricants value chain tant John Sargeant has direct experi-
below the top tier stand to make including refining, branding, M&A, ence with the lubricants industry in the
inroads into the majors’ business. sales channels and market entry Americas, Asia and Europe, and was
So if there is an “elephant in the strategies. A specialist in automotive with BP and Castrol for nearly 30
room,” whether large or small, we lubricants, he has over 20 years of years. For information, e-mail
believe he is telling us success in lubri- experience with Mobil, BP and Castrol. stuart.speding@rpsgroup.com or
cants is even less about assets and size John Unsworth, Ph.D., is senior consul- phone 011-44-7775-99-6658. Web:
and even more about great sales and tant at RPS, after a successful 25-year www.rpsgroup.com/downstream
marketing. ❚ career with Shell where he worked on

LUBES’N’GREASES 47
View publication stats