Episode Transcript
[00:00:00] Speaker A: All right, thanks for the introduction and g'Day, everyone, and welcome to the first time I've ever done the Lubrication Experts podcast live. So you'll have to excuse me. We'll see how this goes. If you've not listened to it before, if you've not listened to it before, you can find it just on YouTube and Spotify, et cetera. It's just called lubrication experts. It does what it says on the tin. I interview experts like Joseph here. So today what we're going to do is have a little bit of a discussion around group five s. Obviously, group five is very much a catch all term, which we will get into and talk about what is really the future of group five in the market, and are there any kind of developments or innovations that are on the horizon? So we've already had the introduction, so maybe I'll just kind of preface this discussion with a bit of a leading question in some ways. So ExxonMobil's own energy outlook kind of predicts that we're going to have a growing population.
We're going to need a fair bit more energy. I think the number is about in the order of 15% by about 2050. So at some point, if we are going to try and meet all the climate goals that have been kind of stated as a 2050 goal, we've got to find energy efficiency somewhere. So this is a bit of a leading question, but what kind of technologies and developments can this industry sort of bring to those sustainability goals?
[00:01:22] Speaker B: Yep, sure. So I guess you've stole my thunder from a couple of stats that I was going to drop in, but, yeah, kind of when we go through and we look at some of, kind of the big mega trends that are coming through, there's kind of really three key numbers that stand out, right? So one is two in that by 2050, the world's population is going to have 2 billion more people here. So that's an awful lot more cars, that's an awful lot more kind of personal ac systems or just everything across the board is going to be increased throughout there, and the world's economy is going to double as well. So that is huge. From you think about the link between energy consumption and GDP, they tend to follow pretty closely, but as you say, we expect there to be some efficiencies gained throughout the system as we move forward. That enables, I guess, that energy use or that energy rise to be kept to around 15%. So hopefully trying to kind of decouple some of that. As you, as you move forward. And I think we heard from some presentations earlier today that some initiatives are already looking at it. And I think the industry that we're in, we probably don't do a very good job of communicating the value that we already create right now. You think about anything that moves you need or any friction. Think about all of the friction losses that then equate to energy, losses that then equate to revenue or equate to something else. That's huge. Any incremental gain you can get there is only going to help. And again, I think we heard earlier today, and kind of this morning, when you look at the baseball categories, you look at kind of the needs moving forward.
The more you can drop your viscosity, the better you're going to get an increase from that point of view. And then I guess there's a general expectation that people will drop down that API classification.
And then from a group five point of view, I mean, you mentioned it's that catch all bucket, if you will. So I'm pretty apt that we're here in Spain to speak about it, because I've used the analogy that group five is like paella before. So you think about a paella, you've got your rice, you've got your meat, you've got your vegetables, you've got your fish, you've got everything in there in that pan. And it's a huge kind of cocktail and a huge mix of things. And group five has kind of become that as well. You have any chemistry ranging from esters through to pags, pibs, potentially some re refined goes in there. So I think we just need to be a bit clearer in terms of what does that mean, really kind of moving forward from that point of view, because every category is going to have a role to play when we look to try and hit those energy efficiency targets. Yeah.
[00:03:47] Speaker A: So I think from my perspective, when I talk to a few of my kind of clients and occasionally people from government, and that, I think the one paper that I always point to is Kenneth Holmberg and Ali Erdemir, who put together that paper which showed that feasibly, what is it? Something like 40% of energy losses is something that we could probably mitigate. And I think they put some numbers around, it equates to about 1.7% of GDP. And that sort of, I think that was a 2017 paper. That's the one that I kind of always point to. I mean, if anyone in this audience has other examples of papers that have been put together that help quantify that, it would actually be really helpful. So come and see me afterwards because that's kind of the one that I keep pointing to and it feels like I'm a bit of a broken record on that one.
[00:04:36] Speaker B: Me too.
[00:04:37] Speaker A: Yeah, right. Okay. So maybe to provide a little bit of context around the group five discussion, it would be helpful to actually step back and look at the API base, all groups. So everyone is familiar with the fact that we categorize them one through five.
I think there is, at least from my perspective, and I'm mostly working with end users. Right.
They see the API base groups and they see them as kind of like a category where the numbers one to two to three to four are, broadly speaking, we are increasing performance. And the kind of underlying assumption is that as you become more Pao like, right, you get better.
And that the way that the base oil groups are constructed implies that Pao is kind of like the top of the mountain.
Are you able to contextualize that? Like why is that the case? And what's the history? Or what are the market drivers behind? Why group four got its own kind of special place?
[00:05:39] Speaker B: Yeah, so, and yeah, I guess like you said, kind of the.
It's not really a misconception, but I guess it really depends on in terms of kind of what application or what attribute to you're looking for your basil to, to do. Because I guess when you step into or kind of step up to those different kind of base or categories, it also has an influence. It's influenced by the way you manufacture and the way you make them as well. You think about kind of the different from aromatics to Nathanix and so on. But I guess to answer your question as to why is there the thought that kind of four is the pinnacle and is kind of the top piece? I mean, that's pretty much kind of what people have been used to, I guess, really in their everyday life in the engine oil space for what, 30, 40, 50 years from a synthetic base oil standpoint. So in that application, it's stability, it's oxidation, it's all of the drain interval performance that you want, which is where Pao gives you a lot of those benefits, a lot of those values that you want to have. And then I guess similarly, if you look at some of the more higher viscosity paos that go into industrial gear oils and those kind of formulations, it's the similar properties that again are all around viscosity control, oxidation. That's kind of really what you want. So I guess the thought as to why is four king, I guess, really comes from, I guess, from my point of view, the fact that engine oil is, I guess, kind of the easiest one to contextualize for the general kind of folks or kind of the general teams across the board. But I guess that's not to say that depending on your application, you need to look at something else and something different. Pau is not a one size fits all for every application, for sure.
[00:07:14] Speaker A: Yeah, it's interesting because I find with end users, they maybe get a little bit confused sometimes, because the way that we've constructed the API base, oil groups, even, for example, you look at what are the conditions under which you fall into one, two, three or four, and it's constructed around things like sulfur content, viscosity index also being the big one. So the assumption is higher viscosity index is better. And I think it's very difficult for a lot of end users to wrap their heads around the fact that in some applications, Vi is not the be all and end all. So in industrial gearboxes, for example, which are operating 98% of the time at a fixed temperature, do you really care about Vi that much heat transfer oils, where in some cases a low viscosity index is actually probably beneficial? So, yeah, I think it's sort of hard to get them out of that paradigm. So if we now kind of move the conversation towards group five, like you said, it's that catch all group. And I find myself having to talk to customers and say, and sort of caution them that group five does not always mean good. You know, it's that sort of bucket where, well, it's vegetable oils, it's, you know, it's naphthenics, but it's also, you know, polyether type alkalbenzenes and everything, I think it kind of feels like everything found its niche. Right? So if you took pags, for example, worm drive gearboxes and gas compression, if you look at esters, jet oils, cobases and eals, if you look at alkylated naphthalenes, it's largely co bases.
What's kind of stopping?
Is it just that these group five s are only useful for specific purposes, or are they other factors which are causing them to not be more widely adopted?
[00:09:01] Speaker B: I guess it depends on how you would define widely adopted, because if I think through the group five space, I think you articulate pretty well, is that each application that you listed there, they've got a very set either kind of OEM requirements or performance requirements or kind of pieces that you need to optimize your formulation for and same as how you would flex a group one to four piece. You flex what you need in the group five space to be able to, to kind of get you there.
Eals, I think, is a great example where you have multiple options for you to get to an EAL formulation that you're trying to achieve. So I think I would argue the point, if you will, that they're there already. And again, if you look at other applications, you look at consume refrigerant oils and refrigeration, they're esta quality or the Esta portfolio. And the characteristics you have on the ester side really lend themselves well to be in the base oil for a lot of those refrigeration based oils. So I think they all kind of already mainstream. But again, it depends on how you unpack that and how you kind of think through which one is which and kind of where do they go. And then even as a co base, I mean, you think about where we use esters from kind of a solubility standpoint, from an additive side, or whether we want to look at seal swelling and those kind of criteria. They have their space in those formulations already, obviously, maybe not as the main base stock, but they're there. They're in that cocktail, they're in that mix for a reason. So I think, yeah, they're there and they're definitely here to stay. Particularly if you look at some of the growing applications and kind of growing industries that are, that are there, you're going to need to look at kind of more specifically, again, what are those application requirements they need to have?
[00:10:50] Speaker A: What about, let's say, for example, supply chain concerns? So one of the, I guess the things that seems to stop some of the adoption of, let's say, newer ester technologies, for example, is this, I don't know if it's true or not, but there's this idea that maybe some of them are not scalable or that, you know, there's a, there's a handful of startups, for example, that are looking at hybrid esters, hybrid power gestures and things like that. And I think because the supply chain is maybe not as well developed as it is for paos, how do we get across that threshold?
[00:11:32] Speaker B: I don't know if it's a supply chain question, because I think from a supply chain point of view, that's fairly well established, unless you're going to some really interesting chemistries in terms of the back end. Again, if I think through synthetic esters, where you've got your acid and your alcohols coming together. And they've gone to some really kind of radical piece that kind of we haven't thought of before. The industry is used to managing that supply chain and managing those difficulties that come. I think some of the challenges more come because the way that these molecules are built up, they are different to paos and mineral bases. Right. Where again, we had a question earlier today on, on reach registration, and I think that's kind of a perfect example of where you look at, I guess, really kind of from a regulation standpoint, kind of what is driving changes here and there, or kind of what may be creating blockers here or there or so on. Because if you're creating a different viscosity, PaO, for example, the chemical registration or structure is largely going to be the same. Whereas if you're looking at a brand new esta technology, whether it's adapt or isosteric or TMP or kind of across the board, you may need to think through those hurdle rates kind of moving forward. So I don't think it's a supply chain piece. I think it's more of a general use and kind of a general registration kind of regulation piece that kind of can look at it and it goes both ways. Right. Because some regulations really drive the benefit or drive the industry in. I see kind of the right direction. When you look at, like the LUSC certification over here in Europe, you look at the US vessel general permit that was introduced in 2013, where you have those biodegradable qualities that you need to have in your product and in your lubricant, and people look to things like esters or Png or others to fill that hole and fill that gap.
[00:13:14] Speaker A: Interesting. So if we.
I guess the premise of my previous question was that there's a whole bunch of group five synthetics that have found their very specific niche. Right.
You obviously work on the group four and group five side at mobile. Sorry, ExxonMobil.
Do you think that there are any other applications where specific group fives might actually be very well suited, but they haven't kind of gone mainstream in that application?
[00:13:49] Speaker B: Okay. Yeah. In terms of they haven't gone big yet, they haven't had their breakthrough movement?
[00:13:53] Speaker A: Yeah.
[00:13:56] Speaker B: I don't know. I mean, I think kind of the, one of the top one that comes to mind is when you think through, you think through kind of compressor oils and you think through what folks are looking for in a compressor oil and you think about the application, I guess, again, the requirements that are there, it's, it can get pretty hot and you're really looking to, I guess, extend your drain interval as long as you, as long as you can. So there are a number of different ways to do that. You can take a, you can blend some minerals in with some pao, you can take some group five s, whether that's alkaline or kind of something else based, and include it in there. But you can get a real benefit, particularly, again, if you look at the alkylated aromatics there, the an side in particular because of how stable that that molecule is. And yet we've, we've got data and we've seen examples of being able to extend compressed raw lifespans up to 16 20,000 hours, which I guess there's a huge step change in terms of what that can do. But why is that not taken off yet? I guess it goes back to kind of the end users at kind of the planned or kind of the location or kind of the overhaul periods and so on. There's almost needs to be a mindset shift or kind of a reset in terms of if I've changed it every year, maybe I don't need to change it every year now because the fluid is doing all of the work and the fluid is doing the pieces that otherwise the maintenance guy would have to do. So I think it's that kind of mindset shift is potentially one on the compressor outside. That could be interesting. And then I guess, other way, I guess the breakthrough moment probably isn't there yet. But if you think through, a lot of the shifts we're going to see on the fuel side are going to be folks and applications moving from liquid fuels through to gas fuels. So you think about if I use my marine background, you think through, everyone is looking to switch from heavy fuel oil or diesel oil and look at lng, ammonia, hydrogen, those kind of pieces. And again, depending on what you're looking at from an infrastructure and from an application point of view, certain group five s offer some really interesting performance characteristics that you want to think through. So again, if you think through hydrogen combustion or you think through kind of the gas combustion, esters could be a great option, or synthetic esters could be a great option for the main base stock in that, in that application.
Again, all of the oems are kind of looking at trying to make their platforms as fuel agnostic as possible and a way to potentially flex that could be to you let the oil and you let the fluid do some of the work. So I think the compressor oil should, in my opinion, have its breakthrough moment soon, hopefully, and then that kind of hydrogen or that kind of gas piece where the esters can look at it. Yeah. Is going to be a really interesting space to develop over the next three. 4510, 15 years.
[00:16:41] Speaker A: So I just want to pull you up a bit on the accolade naphthalene piece.
[00:16:44] Speaker B: Right? Yeah.
[00:16:45] Speaker A: So it's probably the nerdiest thing that I've ever said, but the alkylated naphthalenes are unpartial too. They're my favorite base oil. If you can be said to have a favorite base oil, I think you're.
[00:16:56] Speaker B: The only person who has a favorite base.
[00:16:58] Speaker A: Yeah, yeah, yeah. So I've always wondered why that one wasn't more widely adopted. And is it more. Okay, so there's always going to be weaknesses. Every base always got a weakness. Right? So in An's case, it's probably your poor point, your cold temperature performance slash your viscosity index. Like I said, though, there are plenty of applications where those are not major concerns.
Is it a consumer, I say consumer. Is it like a business education piece that we need to kind of help better educate the market on what is truly valuable about a lubricant? Is that what it's going to take for wider adoption of some of these group five s?
[00:17:40] Speaker B: So I think for Ian specifically, to speak about your favorite base oil, I think it's twofold. One is kind of general awareness. So I know kind of when we were kind of taking a look at, kind of candidly, our own group five offer and kind of what kind ExxonMobil do as a value added supplier in the space. See, we have our Esther portfolio and then we have the athlete naphthalene piece that I guess is kind of our trump card. It's different. There's not many. There's really kind of one of the company that manufactures something similar, which I think is an issue in itself, because again, if I'm a blender and I'm a formulator, I want to know that I've got supply, security.
I have options. Should kind of plan a or plan b go down, I can look to pick something, pick something up. So I think to your point, that's where maybe there is some supply chain, I guess, hurdles that kind of the industry does need to get over. And to think about it a little bit, a little bit more. And then back on the awareness side again, when we were speaking to a lot of folks, and maybe preaching to the choir here at a base, our conference in Europe, but when we spoke about, or kind of when we asked folks about group five, we got such a range of answers depending upon the location and the geography here in Europe. I guess the summarization, if you will, was that when you speak to somebody about group five, you're speaking about esters, and you speak about synthetic esters. That's where everyone's mind goes here. Whereas if you go over to the US, when we see it, what are you doing with group five? They recognize alkyl aromatics as potential. They recognize pags and esters. That's kind of their cocktail of group five that they think through. And then when we asked folks over and over in Asia, it was similar story. It was mainly Esther's and then kind of pags. So I think there's some kind of general industry awareness piece that can happen, but I guess not only with kind of folks here in this room, but kind of continued education with kind of the oems and the approval holders as well. Because again, if I think through, I guess, colleagues that I've spoke to in the past at ExxonMobil, who've been around a lot longer than what I have, they kind of comment on, I guess, the shift that they've seen, really, in the engine oil space over the past 20 to 25 years. From a development standpoint, where the oil was thought of as just a component.
It was consumable, really. It wasn't thought of as part of the system. Whereas you speak to VW and Daimler and those other folks, now they are involving lubricant companies in their R and D work, in their development work, because they recognize that you have to look to optimize that full system. I think that kind of behavioral change is something that should continue to happen as well.
[00:20:13] Speaker A: So you spoke a little bit about some of the regulatory hurdles as well, that some of these, let's say if you have a startup and you've got new molecules, that some of the reach regulations might be a reasonably large hurdle to clear.
But it also, on the flip side of it is, it seems like the energy transition is kind of perfect for the general group five portfolio. So when you think about, so, the benefits of pags, for example, the kind of low traction benefits that you get, and therefore the reduced energy consumption, you look at esters being the amount of bio content, or as we saw from discussions earlier, that you can get, basically recycled bio waste can become a component of esters.
I guess maybe my question is why, with such a heavy emphasis on CSR and like, the transition, where's the gap between people recognizing how it links to their sustainability goals and taking action.
[00:21:19] Speaker B: I think it's a lot to do with regulation. Right. And again, kind of, we heard this morning, I guess we're always going to have the argument or the discussion, if you will, between footprint and handprint. And again, my own kind of candid personal view, I haven't seen something that encapsulates all of that through together. You've got a lot of folks looking at product carbon footprint today, which we need to establish a baseline and we need to see where it is today. But a lot of, again, the big performance benefit that everybody gets from a lubricant is really in the use phase. So you think about if I could squeeze out one or 2% more energy efficiency or one or 2% more fuel, fuel economy, then that's going to far outweigh even kind of a small uplift or a large uplift, really in kind of the product carbon footprint of the lubricant itself. So I think regulation is definitely one that kind of is going to drive everyone's decision. And again, we can point to examples of that in the past.
[00:22:13] Speaker A: Right.
[00:22:14] Speaker B: Again, I think to go back to my marine heritage and background, that US vessel general permit, I think is the perfect example of that. So that's where I guess for some folks who may not be familiar. So in 2013, the vast majority of vessels that enter the US space for what they call kind of sensitive applications, they have to use a product that is readily biodegradable. So that resulted in a big shift of, you think about those hydraulic systems, the stern tube systems, the gear of the gear oil systems, a real shift from mineral oil through to what largely became kind of an ester or to some kind of a pag market. There are examples of that in history. And then again, I would imagine those regulations are only going to continue both in scope and in kind of coverage from a location point of view. You've got the US forestry is there with kind of a similar piece. And then again here in Europe, we've got the EU ecolabel. That kind of speaks to that speaks to that as well. So I think there are kind of good examples of where that is coming through and kind of where that's occurring and happening. And then the other piece is really in terms of kind of going back to the Oems and going back to what are they looking for in their fluids and in their oils. I guess you mentioned the energy transition. So again, if I think through all of those changes from liquid fuels to gas fuel, that's probably going to occur over the next 15 to 20 years, you think about all those ancillary systems that are going to be needed to keep the fuel, keep the fuel cool, whether that's liquefaction kind of compressors, all of those kind of pieces, then that's when you're going to think through, again, synthetic esters and those pieces for your refrigeration applications or an, for your compressed applications. So the momentum is building, I think, for sure.
[00:24:04] Speaker A: And that doesn't even get into data centers. Right. So.
All right. As we start to kind of wrap up here, and maybe if we've got time, we'll take a couple of questions as well.
Is there anything about, like, group five s that you wish people knew?
[00:24:20] Speaker B: I mean, if everybody in this room takes away with an image of a pale edition and thinks through group five, I think that my message is done because I think that really articulates it well, that a group five, you have to scratch into the surface to really understand what that group five molecule is, because, again, it's very different to group four.
So it's kind of trying to uncouple that from everyone's mind. And then I think it's also, again, we heard this morning kind of an interesting overview of, I guess, the supply demand dynamics and kind of the linkage between maintenance and refineries and so on with group two, group three kind of manufacturing, whereas again, group five, that's typically not the case. These products are manufactured on demand. They are not as linked into, I guess, some of the more economic systems that we typically look and track and follow from, from here and then the other pieces is really that no group five is created equal. They all have their space, they all have their niche or their application that they really do add value in from that point of view. So, yeah, I think that's kind of the real key piece for me, I think.
[00:25:25] Speaker A: Cool. Well, Joe, thanks so much for answering the questions, and I guess for the audience, if you do have any questions about group five, you can talk to either Dow or King Industries, right, or us. Yeah, we obviously talked to ExxonMobil, and Joe will be around to take questions.
