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Base oil industry trendsGrowing use of Group II in Asia
May 18, 2017
The 11th ICIS Asian Base Oils & Lubricants Conference
Duncan ConnollyBasestocks & Specialties Marketing Development Manager
ExxonMobil Fuels, Lubricants & Specialties Marketing Company
This presentation includes forward-looking statements. Actual future conditions (including economic conditions, energy demand, and energy supply) could differ materially due to changes in technology, the development of new supply sources, political events, demographic changes, and other factors discussed herein (and in Item 1A of ExxonMobil’s latest report on Form 10-K or information set forth under "factors affecting future results" on the "investors" page of our website at www.exxonmobil.com). This material is not to be reproduced without the permission of Exxon Mobil Corporation.
What we’ll discuss today:
• Market background and trends• Base oil design & lubricant performance• Implications for base oil industry
Base oil industry trends Growing use of Group II in Asia
Asia driving global growth
* ExxonMobil’s 2017 Energy Outlook, and assessment of publicly available information
GDP Energy demand Base stock demand
+16%base stock
+53%GDP
+18%energy +30%
base stock
+84%GDP
+29%energy
3
Macro trends driving future requirements
• Increasing demand for efficiency
• Need to reduce GHG emissions
Market Trends
• Higher fuel economy• Energy efficiency• More severe
operating conditions• Longer drain intervals
Industry changes Driving base stock requirements
• Higher performing base stocks
4
Growing car park with increasing fuel economy needs
5
0
300
600
900
2000 2010 2020 2030 2040
Elec/Plug-in/Fuel CellHybridNatural Gas & LPGDieselGasoline
Asia - Light Duty Vehicles*Million
0 25 50 75
World
U.S.
E.U.
Japan
China
India
0 25 50 75
World
U.S.
E.U.
Japan
China
India
Average New Car Fuel Economy*Miles per Gallon
‘25
‘21
‘20
‘20
‘21
Target
20152040
2008
*Source: ExxonMobil’s 2017 Energy Outlook
Fuel economy needs driving engine trends
6
**Source: Light-Duty Automotive Technology, Carbon Dioxide Emissions, and Fuel Economy Trends: 1975 Through 2016; US EPA, Nov. 2016*Source: ExxonMobil’s 2017 Energy Outlook
0 25 50 75
World
U.S.
E.U.
Japan
China
India
0 25 50 75
World
U.S.
E.U.
Japan
China
India
Average New Car Fuel Economy*Miles per Gallon
‘25
‘21
‘20
‘20
‘21
Target
20152040
2008
Engine trends**
Growing use of Group II
*Source: ExxonMobil assessment of publicly available information
Group IIIGroup I
Group II
2016
7
• Extensive geography with China, SEA and India leading in volume
• Varied product mix profiles across the region
Diverse lubricant demand in Asia
*Source: ExxonMobil assessment of publicly available information 8
• AP engine lubricants requirements a mix of ILSAC and ACEA specifications
• Older performance categories predominate, with transition towards newer specifications
• Diverse requirements call for a mix of base stock supply to region
Extensive range of lubricant performance requirements
*Source: ExxonMobil assessment of publicly available information 9
• Diversity in viscosity grades within the region
• Increasing penetration of multi-grade, 15W & 10W lubricants, driven by fuel economy
• Diversity of base stock quality and supply needed
Multiple viscosity grades required to meet HDEO needs
*Source: ExxonMobil assessment of publicly available information 10
Diversity of lubricant needs drive base stock design
Source: EM assessment of publically available information.
DiluentOil
Marine
Industrial
HeavyDuty EO
PassengerCar EO
GI
FuelEconomy
OEM Requirements
Oil Life
EvolvingPerformance
Changing TBN and Fuels
Emission/CompositionConstraints
LNCapability
Solvency
HNCapability
Ox.Stability
Volatility
Low Temp
Energy Efficiency
GII/GIII GI
11
• Diverse requirements within the region
• Base stock supply, quality and capability paramount
Continued Group II growth addresses Asia’s specific needs
*Source: ExxonMobil assessment of publicly available information 12
Reliable supply of high quality Group II promotes technology programs resulting in an increase of cost-efficient solutions for a wider range of lubricant applications
Group II enables cost efficient formulations
Grp IV Grp III Grp II Grp I
0W 0W 5W 10W 15W Lo-Vis Ind Hydraulic Gear Marine Hi-Vis Ind (high perf)
13
hist
oric
to -
be
Illustrative of Asia Pacific
Grp IV Grp III Grp II Grp I
Key implications for the industry
• Respond to scale of AP growth
• Satisfy individual markets with diverse needs
• Address diversity and value chain complexity
• Enable cost effective blending through superior base stock design and performance
• Ensure availability of affordable, reliable supply
14
A global slate delivers valueTechnical Substitutability is demonstrated by intra-slate base stock interchange
EHC 50
EHC 110
EHC 45
EHC 50
EHC 65
EHC 110
• Same product, different base stock mixes• No extra engine testing
. . . and derives its largest value in enabling viscosity grade read across
• Different products, different base stock mixes• Reduced engine test costs
10W-30 Engine
oil5W-30 10W-30 15W-40 20W-50
EHC 120
EHC 120EHC
45EHC 65
EHC 110
EHC 120
EHC 65
EHC 45
EHC 50 EHC 120EHC 65EHC 45 EHC 110
EHC 50
15
Rotterdam and Singapore investments ensure globally consistent quality and reliable supply of EHC™ Group II base stocks
Global investments demonstrate long term commitment
Group I
Group IV
Group IIGroup III
Singapore expansion
Not representative of total number of refineries; some refineries produce more than one group 16
In today’s constantly changing industry landscape the base stock business will inevitably need to adjust and address new challenges. ExxonMobil believes companies with …
Addressing evolving customer needs
Strong global footprint and investment capability
Deep knowledge and expertise across the full value chain
… will have the means to be successful in the short term and the long term.
Access to advantaged technology and marketing
17
What we discussed today:
• Market background and trends• Base oil design & lubricant performance• Implications for base oil industry
Base oil industry trends Growing use of Group II in Asia
