focused on group iii base oil · 2008-05-22 · 100 200 300 400 500 600 700 800 900 1,000 diesel...
TRANSCRIPT
Focused on Group III Base Oil
Introduction
Backgrounds for Group III Base Oil
Past and Present of Group III Base Oil
Future (focused on Merchant Market)
Price Overview
Summary and Issues
Conclusion
No.1 energy & chemical company in Korea
– largest refining capacity(1.1Mil B/D), market share and marketing network in Korea
Leading player in other major energy sector in Korea
– E&P, Refining & Marketing, Coal, City Gas & Lubricant
World largest Group III base oil manufacturer
– Hydro-Cracked / IDW /Hydro Treating Process– Total Capacity 950,000 MT/Y– 370,000MT/Y new capacity from mid 2008
SK Corp.
SKTelecom
SKNetworks
OtherSubsidiaries
SK Holdings
Holding
Company
SKTelecom
SKNetworks
SK Energy
Operating
Company
OtherSubsidiaries
• Mixed Corporate Structure with
Businesses & Investment Securities
• Splitting into a Holding Company and
an Operating Company
Source: SK Corp. IR Dept.
Current Structure Holding Company Structure
API Category
Viscosity Index
Saturates(%)
Sulfur(%)
Group I 80-120 < 90 >0.03
Group II 80-120 ≥ 90 ≤ 0.03
Group IV PAO
Group V All others
Definition
• Inherent High Viscosity Index
• Excellent Low Temperature Performance
• Low Volatility, High Flash Point
• Excellent Thermal and Oxidative stability
※ Can be marketed as ‘Synthetic’
Features
ItemASTM
MethodYUBASE 4 YUBASE 6 YUBASE 8
KV @ 40°C, cSt D445 19.6 36.9 47.0
KV @ 100°C, cSt D445 4.25 6.46 7.60
Viscosity Index D2270 123 130 128
NOACK Volatility, wt% D5800 14.7 7.1 5.0
Pour Point, °C D92 -15 -12 -12
Flash Point, °C D97 230 240 260
YUBASE Properties
2000
Group III
Group II
Group I
25,000
20,000
15,000
10,000
5,000
30,000
[KMT]
2005
4%2%
2010
7~8%
2015
10~%
Source: Lubes n Grease, 2006
Introduction
Backgrounds for Group III Base Oil
Past and Present of Group III Base Oil
Future (focused on Merchant Market)
Price Overview
Summary and Issues
Conclusion
Legislation Consumers
OEMsLubricant
Manufacturers
Global Economy
• Very Low Sulfur (≤ 0.03 %)
• Very High Viscosity Index (120 + )
• Excellent Low Temperature Performance
• Low Volatility
• High Flash Point
• Excellent Thermal and Oxidative stability
※ Can be marketed as ‘Synthetic’
Features
Group III Base Oils
Introduction
Backgrounds for Group III Base Oil
Past and Present of Group III Base Oil
Future (focused on Merchant Market)
Price Overview
Summary
Conclusion
1st
2nd
3rd(e)
3rd(e)
2nd
1st
Small capacity for own captive use
Unaccustomed product
Doubts on investments
Economics of scale
Over-qualified quality
Lack of commercial formulation
3rd(e)
2nd
1st
Demand has been well grown
To substitute PAO
As correction fluid blended with
Group I base oils
Formulation started to bloom
Commonly acknowledged
1st
3rd(e)
2nd Formulation development accelerated
Demand is larger than Supply
in a short term
Demand differs by grades
Interests in future investments
Introduction
Backgrounds for Group III Base Oil
Past and Present of Group III Base Oil
Future (focused on Merchant Market)
Price Overview
Summary
Conclusion
S-Oil Petronas Neste
+5.5KBD
+7.5KBD
Meet the demand deficit
But, sudden oversupply?
Then, severe competition
Even against Group I/II/II+?
Quality Differentiation
GS Caltex
+3KBD
+7.7KBD
Accelerating technical changes
Increasing commercial demands
Market expansion
S-Oil Petronas GS CaltexNeste
GTLGTL
GTL base oils emerge ?
Group III+ Merchant market
GTL vs. Group III?
Destiny of Group IV & V?
GTL S-Oil PetronasNesteGS
Caltex?
+00 KBD
+0 KBD
+0 KBD
Introduction
Backgrounds for Group III Base Oil
Past and Present of Group III Base Oil
Future (focused on Merchant Market)
Price Overview
Summary
Conclusion
* Source: SK Corp, ICIS-LOR Report
100
300
500
700
900
1,100
1,300
Diesel
DUBAI
WTI
Group III Posting(US)
Group II+ Posting (US)
Group I (S’pore)
Group I Posting (US)
Group I (NWE)
Group I (Asia)
Group I (Europe)
[USD/MT]
Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May
‘04 ‘05 ‘06 ‘07
100
200
300
400
500
600
700
800
900
1,000
Diesel
DUBAI
WTI
Group I (S’pore)
Group I (NWE)
Group I (Asia)
Group I (Europe)
[USD/MT]
Crude oil and fuel prices have
increased dramatically
Short supply of fuels & base oils
Competition on Production
Base Oil vs. Fuel
Concerns on pricing mechanism
Time Lagging Issue
* Source: SK Corp, ICIS-LOR Report
Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May
‘04 ‘05 ‘06 ‘07
Group III Posting(US)
Group II+ Posting (US)
Group I Posting (US)
* Source: SK Corp, ICIS-LOR Report
May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May
‘06 ‘07
Diesel
DUBAI
WTI
Group I (S’pore)
Group I (NWE)
Group I (Asia)
Group I (Europe)
Group III Posting(US)
Group II+ Posting (US)
Group I Posting (US)
Crude oil/fuel prices fluctuated
Base oil prices increased
continuously
Short supply of base oils
Pricing mechanism was changed
Enjoyed hugh margins ever
* Source: SK Corp, ICIS-LOR Report
100
300
500
700
900
1,100
1,300
Diesel
DUBAI
WTI
Group I (S’pore)
Group I (NWE)
Group I (Asia)
Group I (Europe)
[USD/MT]
Crude oil/fuel prices increased
Base oil prices have decreased
Domestic & Export prices differ
Balance or Surplus
Margins get squeezed
Group III Posting(US)
Group II+ Posting (US)
Group I Posting (US)
Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May
‘04 ‘05 ‘06 ‘07
Demand
Specification changes
Opportunity cost
Competitive dynamics
Raw Material Costs
Competition against fuels
Supply
Cost
Value
New production
Turnaround
Disasters Economic growth
Car/Industrial market
Base Oil Prices
0
50
100
150
200
250
300
350 Group III Premium
Group II+ Premium
[USD/MT]
* Source: SK Corp, ICIS-LOR Report
Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May
‘04 ‘05 ‘06 ‘07
Importance of ‘Raw Material price’ has been increased
– Base Oil and Additive price for Lube blenders
– Feedstock price for Base Oil Manufacturers
Pricing mechanism get diversified
– Fixed price vs. Spot pricing vs. Using price indicators
Price Indicating System
– Prices of Crud Oils or Fuels
– Base Oil Prices on ICIS Report (US vs. Europe/Asia)
– Positive or Negative price circulation
– Any other options?
Introduction
Backgrounds for Group III Base Oil
Past and Present of Group III Base Oil
Future (focused on Merchant Market)
Price Overview
Summary and Issues
Conclusion
Demand is growing rapidly
Supply is catching up the demand step by step
Increased familiarity
Reasonable Price Premium
Supply in the region
Demand in the region
Regional mismatch of supply & demand
Supply in the region
Demand in the region
Regional mismatch of supply & demand
Trends encourage new investments
- Technical trends require high quality base oils
- Economic trends for higher return
- Supply will over the demand in short term
Technical DemandsProduction Capacity
Commercial DemandsTechnical Demands
Production Capacity
Commercial Demands
?Production Capacity Commercial Demands
Economic Risks
Logistic Cost
− Shipping
− Tanks
R&D Cost
− Formulation
− Approvals
Marketing & Operating Cost
Cost Burdens
Feedstock Cost
Base Oil Price Movement
Competition against Fuel
Severe Competition
in high quality base oil market
− Group III Premium will be changed
− Full Production is the matter
Do you have enough CAPTIVE USE or PARTNER?
Viscosity Index
Pour Point
Oxidation & thermal stability
Volatility
Viscosity Grades
Viscosity Index NOACK
Expecting quality differentiation in Group III base oils
80
90
100
110
120
130
140
Gr-Ⅰ100N
Gr-Ⅱ100N
Gr-Ⅲ4cSt
New YUBASE4
PAO4
10
12
14
16
18
20
Gr-Ⅰ100N
Gr-Ⅱ100N
Gr-Ⅲ4cSt
New YUBASE4
PAO4
Introduction
Backgrounds for Group III Base Oil
Past and Present of Group III Base Oil
Future (focused on Merchant Market)
Price Overview
Summary and Issues
Conclusion
DemandSupply
Group I
Group II
Group II+
PAO
Group III
Group III
Group III/GTL
DemandSupply
Group III
Oversupply of high quality
base oils could put Group III
in lower performance tiers
Oversupply may push
demand growth
Group I
Group II
Group II+
PAO
DemandSupply
Group III
Increasing demand of high
quality base oils can put
Group III in premium tiers
in long term view
Group III/GTL
Group I
Group II
Group II+
PAO
Group III base oil market will continue to grow
− Technical needs - Applications and regulations
− Marketing needs - Cost effective, Synthetic labeling
− Emerging new market
More competition is expected in high quality base oil market
− GTL and other new Group III base oil manufacturers
− Oversupply of Group III base oils might bring an impact on other tier market
Leading Group III base oil manufacturer
- Production Quantity
- Product Quality
Customized Service Provider
- Logistics
- Technology
Supply Stability
Globalized & Localized Service
Long-term Relationship
Strategic Partnership
Branch Office Storage Tank Agent/Distributer
Houston Tokyo
Jakarta
London
Tianjin
SK Corp.