1. 2 presentation overview group iii base oil characteristics market forces and demand drivers for...
TRANSCRIPT
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2
Presentation Overview
Group III base oil characteristics
Market Forces and Demand Drivers for Group III Base Oil
SK Energy introduction
Group III base oil supply / demand forecast
Summary
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Energy & ChemicalsEnergy & Chemicals
51%51%
Telecomm-Telecomm-unicationsunications
30%30%
Trading & Trading & ServicesServices
19%19%
SKGroup
SK Group
One of the largest enterprises in Korea “Most preferred company to work for” in Korea
50
75
Reven
ue (
US
B$)
50
‘03 ‘04 ‘05 ‘06
25
56
61
71
86
‘07
4
SK Energy
Refining & Marketing Upstream Petrochemicals
Reserves: 500 Mil. Bbl
Production: 22,000 B/D
CDU: 1,115,000 B/D
RFCC: 117,000 B/D
H/C: 45,000 B/D
Lubricant: 4,000 B/D
Base Oil: 28,000 B/D
Ethylene: 730,000 Ton/Yr
Propylene: 840,000 Ton/Yr
BTX: 2,607,000 Ton/Yr
• Founded in 1962 as Korea’s first oil refiner • Continues to be the nation’s leading player• Third-largest refining capacity in Asia-Pacific region
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Ulsan
Incheon Daejeon
Seoul (HQ)
Employees:
5,661Gas Stations:
4,519Storage Terminals:
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Domestic Global
SK Energy
London
Moscow
Almaty
Kuwait
Singapore
Guangdong
Shanghai
Beijing
TokyoHouston
New Jersey
BranchSubsidiary
Dubai
Exploration
LNG Business
• Two production facilities, Ulsan and Incheon• Operates in more than 20 Countries
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윤활유
As-IsAs-Is Spin-off (‘09.10.1)Spin-off (‘09.10.1)
SK Energy unships Lubricants Biz.
in a form of physical division.
Newly established company
“SK Lubricants” will be launched
(100% SK Energy owned subsidiary)
Lubricants business exist as one of
SK Energy’s biz units
SK Energy
Chemical E&P LubricantsRefining
SK Energy
Chemical E&PRefining
SK Lubricants
According to the BOD resolution on 16th July, Lubricants business of
SK Energy split off to a new company “SK Lubricants (tentative name)”
100% subsidiary
Spin-off Structure
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SK Energy plans to enhance value of the company through separation of competitive individual business units such as
lubricants biz.
Create Create
CorporateCorporate
ValueValue
Corporate
Governance
Corporate
Governance
Business
Structure
Business
Structure
Financial
Structure
Financial
Structure
BOD Focused
Management
Increasing
Competitiveness of each
business
Developing
Growth Options
Enhance flexibility of biz.
structure
Maintaining
Credit Rating
‘09 『 Best corporate governance 』 , 『 Best audit system 』
Secure liquidity and maintain proper investment level
Biz structure improvement
through spin-off
- Active response to environment changes
- Acquire appropriate management system for the individual
business
- Responsible management through performance separation
- Create value as a lubricants specialized company
Background
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Presentation Overview
Group III base oil characteristics
Market Forces and Demand Drivers for Group III Base Oil
SK Energy introduction
Group III base oil supply / demand forecast
Summary
9
Base Oil Classification
API Category
Viscosity Index (VI)
Saturates(%)
Sulfur(%)
Group I 80-120 < 90 and/or > 0.03
Group II 80-120 ≥ 90 and ≤ 0.03
Group IIIGroup III 120 +120 + ≥≥ 90 and90 and ≤ ≤ 0.030.03
API Base Oil Classification
GRP II+
GRP III+
Group IV PAO
Group V All others
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Properties of Group III Base Oils
ItemASTM
Method
HC Residue
HC Residue (High Waxy)
Slack Wax
(1)
GTL
(2)
KV @ 100°C, cSt D 445 4.2 4.15 3.9~4.1 3.8~4.2
Viscosity Index(VI) D 2270 122 134 136 135
NOACK Volatility, wt% D 5800 15.2 13.0 <14.8 12.0
Pour Point, °C D 92 -15 -18 <-18 <-30
CCS Vis @-30°C, cP D 5293 1590 1130 <1000 <1000
4 cSt Grades
Source: (1) ExxonMobil website, (2) The 3rd Fuel & Lube Asian Pacific Conference
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YUBASE Physical Properties
Physical properties, YUBASE slate
YUBASE 4 YUBASE 4+ YUBASE 6 YUBASE6+
Vis. @40 , cSt℃ 19.5 18.4 36.9 35.4
Vis. @100 , cSt℃ 4.22 4.20 6.48 6.65
Viscosity Index 124 134 130 146
Pour Point, ℃ -15 -18 -12 -12
CCS @-25 , cP℃ - - 2920 2420
CCS @-30 , cP℃ 1590 1190 5200 4160
Noack (A), wt% 15.2 13.5 7.5 4.1
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Presentation Overview
Group III base oil characteristics
Market Forces and Demand Drivers for Group III Base Oil
SK Energy introduction
Group III base oil supply / demand forecast
Summary
13
Group III Production Capacity
Most Group III supplier production is located in Asia
60% (3 largest suppliers)
Source: 2008 Lubes ’N’ Greases
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How is the capacity of Group III base oil growing and evolving?
Group III Production Capacity
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Base Stock Availability Interdependence
Source: Lubes N Grease 2008 Announced upcoming capacities.
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SK Base Oil Production Plan
World largest Group III base oil manufacturer
Hydro-cracked / CDW / All hydro processing routeTotal Group III production capacity is 1.1 million MT/YAdditional new plants will be available in 2012 & 2014 with revamping of current plant(#1~3 plant)
1s
t
2n
d
3r
d+10 KBD
4th
+10 KBD
5th
+4.5 KBD
1~3rd
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Group III Supply/Demand Forecast
2003 2007
75,000
50,000
25,000
Global SupplySupply by SK energy
[BPD]
2008
100,000
125,000
....... 2009 2010
* O : Other Suppliers
2013
SK
GTL
SK
O
O
2014
GTL
SKSK
O
O
SKNew Plants- SK & Pertamina- PETRONAS/GS
2011
SK
O
GTL
2012
GTL
O
SKSK
A : Technical Demand A for Group III (16% annual increase)
A
B
B : Technical Demand B for Group III (21% annual increase)
C
C : Technical(B) + Commercial Demand for Group III
Technical Demand
Commerical Demand
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Main Issues to be concerned for the future
Invisible releasing timing of announced new plants - GTL, New Group III plants....(?)
When 0W-20/5W-20 will become the main-grade in the After-Market (Service Fill)? - 2013 after GF-5 ? - Movement toward top tier product
Emerging new markets
The economics of Group I plants
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Presentation Overview
Group III base oil characteristics
Market Forces and Demand Drivers for Group III Base Oil
SK Energy introduction
Group III base oil supply / demand forecast
Summary
20
Market Forces Driving the Use of High Quality Base Oils
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OEMs Continue Shift From 10W-30
OEM 0W-20 5W-20 5W-30
Toyota*2AZ-FE engine:Camry, Solara,
Highlander & RAV4
Genuine Oil grade since 2006
1.5 L, 3.5 L
Ford Cars and Trucks
Main grade
Honda Main grade 2.0 L
Nissan 2.5 L, 3.5 L
Hyundai 2.0 L, 2.4 L, 3.3 L
BMW 3.0 L
Chevrolet Cars and Trucks
2.2 L, 3.9 L, 4.3 L, 4.8 L
GM 2.4 L, 3.8 L,
5.3 L
* Source:Toyota TSB EG018-06
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Grade Shift in US Sales
Top Selling Grades ‘06 MM gals
% Change ‘06 vs ‘05
Gasoline
5W-20 65.3 +22 %
5W-30 231.1 +6 %
10W-30 235.0 -14 %
10W-40 58.3 -13 %
20W-50 22.5 -14 %
Diesel
5W-40 1.9 +22 %
10W-30 10.5 +12 %
15W-40 299.7 0.7 %
Source: NPRA Sales Report
Higher
Fuel
Efficiency
% Change‘07 vs ‘06
+11 %
+ 5 %
-13 %
-14 %
-19 %
+34 %
-24 %
-0.2 %
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US Gasoline Engine Oil Sales
0
50
100
150
200
250
300
350
2003 2004 2005 2006 2007 2008
10W-30
5W-30
5W-20
0W-20
Source: NPRA US Sales Reports
Mill
ion
Gal
lon
s
-16 %
+11 %
+20 %
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Demand Drives the Use of High Quality Base Oils
•Better Fuel
Economy
• Durability
5W-205W-200W-200W-20
Base Oil/ Base Oil/ Formulation Formulation TechnologyTechnology
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The changes of standard from GF-4 to GF-5
Source: Lubrizol,[www.gf-5.com]
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ILSAC GF-5
API will announce the new GF-5 specification by the end of 2009, at the earliest; car manufacturers have to use GF-5 for year 2011 vehicle models.
Higher fuel economy expectations will increase demand for low viscosity SAE grades: 0W-20, 5W-20.
Sequence VID (6D) will be the method used to test for fuel economy Currently developed by a consortium of OEMs, marketers and additive
companies. ILSAC GF-5 proposes higher fuel economy specifications than GF-4 limits. The new Sequence VID still to be benchmarked against the existing
Sequence VIB test. VID test isn’t ready so comparisons between VIB and VID limits are
premature.
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America’s Outlook for 2010 to 2015
Gasoline Engine Oil
- Expect growth of SAE 0W-20 grade for Gasoline Engine Well accepted that SAE 0W-20 will increase fuel economy Honda and Toyota already announced SAE 0W-20
requirements for current (since 2006) and future engines
OEMs will want to steer away from SAE 15W-40 oils to gain fuel economy
Look for SAE 5W-30 and 5W-40 grades, if not 0W-30 and 0W-40, to maximize fuel economy
Light Duty Diesel Engine Oil
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2011MY CAFE(Corporate Average Fuel Economy) standard may be 27.3mpg, ~8% above current, and 35mpg by 2020
Key Market Trends – Fuel Economy
100% Group III
Group III < 10%
Group III demand increases with increased fuel economy demands -
GF-5 will cause 0W-20 and 0W-30 oils to become mainstream OEMs recommend lower viscosity grades for CAFE and fuel economy marketing
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What do these market shifts mean for the Group III Marketers and the Group III base oil markets?
Fuel economy
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Presentation Overview
Group III base oil characteristics
Market Forces and Demand Drivers for Group III Base Oil
SK Energy introduction
Group III base oil supply / demand forecast
Summary
31
Summary
Market forces continue to increase the demand for Group III base stocks
SAE 5W-20 and 0W-20 grades will grow and increase demand for Group III base stocks
Global Group III new supply from 2011 to 2014 may experience a surplus, depending on announced project schedules
Higher VI Group III base stocks enable product differentiation