Shale gas and the lubricants market
Jeanna Van Rensselar, Contributing Editor | TLT Feature Article November 2014
Natural gas is an appealing energy source, but presents a host of strategic issues for STLE members.
KEY CONCEPTS
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Shale-derived natural gas will result in specialized lubricants for natural gas-powered vehicles and high-performance lubricants from liquefied natural gas basestocks.
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Lubricant companies should factor the risks and opportunities of participating in these markets into their short- and long-term strategies.
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Natural gas long-haul vehicles may be viable in the near future, but natural gas passenger cars are a long way from practicality.
THE LUBRICANTS MARKETPLACE WILL SEE EFFECTS OF THE RELATIVELY SUDDEN ABUNDANCE OF SHALE DERIVED NATURAL GAS in the U.S. on two fronts: specialized lubricants for natural gas-powered vehicles and the emergence of high-performance lubricants formulated from liquefied natural gas basestock. Natural gas is an appealing energy source for reasons that include:
•
It is significantly less expensive than gasoline (especially in the U.S. and Canada).
•
It emits almost no carbon.
•
Gas plants can be built relatively quickly and ramped up or wound down easily.
Today transportation-sector consumption of natural gas in the U.S. is about 2 percent of the total. But experts predict that in a high-demand, high-supply scenario, sales of heavy duty natural gas trucks would grow to account for 14 percent of all new heavy duty truck sales, and natural gas vehicles (NGVs) would account for 9 percent of total heavy duty vehicle miles traveled in 2030 (
1). The disparity between the percentages of predicted truck sales and miles traveled points to prospects that favor short-haul over long-haul trucks.
SHALE GAS
There are about 900 trillion cubic meters of unconventional gas worldwide. Of this, about 180 trillion may be recoverable. Principle among these unconventional, recoverable gases is shale gas. In 2000, shale gas was a niche industry providing only 1 percent of U.S. natural gas. By 2010, it was more than 20 percent, and by 2035 predictions are that 46 percent of the natural gas supply in the U.S. will come from shale derived gas (
2).
Shale gas was first extracted in Fredonia, N.Y., in 1821. Horizontal drilling was introduced in the 1930s, and in 1947 the first U.S. well was produced through hydraulic fracturing.
Because most (not all) shale formations prevent gas from flowing naturally to the surface, shale gas wells depend on hydraulically produced fractures. During the hydraulic fracturing process, fracturing fluids consisting of about 90 percent water, 9.5 percent sand and 5 percent chemicals (to improve flow) are high-pressure injected through a steel pipe deep underground (
3). The pipe passes through several geologic layers, including aquifers, into the layer of shale where it artificially produces fractures that otherwise form naturally. These fractures (whether artificial or natural) create conduits for gas and petroleum to migrate to reservoirs where they can be collected. The pipe’s casing and protective cement are critical parts of the well construction that protect groundwater and maximize production. These wells are economically appealing because they can be developed in a few months and yield product for up to four decades.
The average 18-wheel long-haul truck has a 150-gallon diesel tank that will fuel the truck for about 900 miles.
www.canstockphoto.com
LUBRICATING NGVs
The engine technology for NGVs, whether powered by CNG (compressed natural gas) or LNG (liquid natural gas), is virtually the same—there is no such entity as an LNG engine or a CNG engine. The difference is the fuel supply and storage.
The market for natural-gas fleet vehicles is strong and growing stronger. Among the reasons are the relatively high price of petroleum and the achievable logistics of refueling short-range fleet vehicles. In addition to most major metropolitan municipalities, several high-profile fleet operators, including UPS and FedEx, are making the shift to natural gas for short-run trucks.
For lubricant formulators, manufacturers and distributors, this means that an entirely new market is opening up. However, because of the space that fuel storage requires, the future of natural gas-powered passenger cars is much less certain.
THE CHALLENGE OF LONG-HAUL TRUCKS
Natural gas stakeholders are currently building an LNG refueling infrastructure across the U.S. The goal is that by the end of 2014, a driver will be able to find an LNG refueling station every 250 miles along each of the major interstate truck corridors (
4). Assuming these stakeholders are successful, three issues still stand in the way of widespread implementation of natural gas long-haul vehicles:
1.
Fuel storage capacity
2.
Weight
3.
Refueling time.
Fuel storage capacity. Aside from the high cost of creating natural gas engines capable of powering 18-wheel trucks, there is the major barrier of fuel storage. Both types of natural gas (CNG and LNG) can theoretically be used for truck fuel. But CNG has an energy density so low that it is just not practical to consider it for use in a long-haul truck.
As measured by storage volume, no form of natural gas is as energy dense as diesel (liquids are measured in gallons and gas is measured in cubic feet). One gallon of diesel requires 0.133681 cubic feet of space, so 1 cubic foot accommodates 7.48 gallons of diesel. It takes 1.7 gallons of LNG and 3.8 gallons of CNG to produce the same energy as 1 gallon of diesel. That’s 70 percent more storage space required for LNG and 280 percent more storage space required for CNG. This is workable for a delivery truck, but not feasible for a long-haul vehicle. The average 18-wheel long-haul truck has a 150-gallon diesel tank that will fuel the truck for about 900 miles. To equal that, an LNG tank would need to hold 255 gallons and a CNG tank 420 gallons. This is primarily why LNG trucks currently on the road cannot go more than 450 miles between fill-ups.
A 150-gallon LNG tank system is equivalent to a 75-gallon diesel tank system, providing 400-450 miles of range, which is enough fuel for most fleet vehicles to complete a full day of service and return to the depot in the evening. But with twin 150-gallon fuel systems onboard and a resulting range of up to 900 miles, an LNG truck could function as a long-haul vehicle.
Weight. Diesel weighs 7.15 pounds per gallon. So a truck with a 150-gallon tank is carrying 1,072 pounds of diesel. This does not include the tank. LNG capable of producing the same amount of energy would weigh 1,823 pounds. CNG would weigh even more.
Add to that the fact that LNG tanks and related fuel systems weigh much more than the tanks for diesels, and the result is an equivalent LNG fuel and tank that weigh almost 62 percent more than its diesel counterpart (
5, 6). The extra weight itself burns extra fuel and reduces the load that the truck can haul.
On the other hand, to comply with EPA regulations, diesel trucks must use diesel exhaust fluids (DEFs) to reduce emissions. Spark-ignited, natural gas engines don’t use DEF, so they don’t need the combined 550 pounds dedicated to the selective catalytic reduction (SCR) equipment, including the DEF and tank. This means that some LNG tank systems could actually weigh less than equivalent diesel systems.
Refueling time. A diesel pump can dispense fuel at 15-60 gallons per minute. This means that the longest it would take to fill a 150-gallon tank would be 10 minutes. CNG, at its fastest, fills at an equivalent 4-6 gallons per minute. This isn’t an issue for fleet trucks, which return to the depot every evening and can be filled overnight.
LNG fuels at 25-35 gallons per minute, the energy equivalent of 15-20 gallons of diesel per minute. While refueling speed can compete with diesel, there are some extra steps that add to the LNG refueling time. For example, the fuel pump operator needs to put on personal protective equipment, consisting of gloves and a face shield (
7).
The main barrier for widespread adoption of natural gas-powered vehicles (both trucks and passenger cars) is the lack of a refueling infrastructure and the high price of creating one. The major disincentive for doing so is uncertainty over natural gas prices and uncertainty over exactly how long natural gas reserves will last. Oceanside, Calif.-based, North American Repower works with OEM-level diesel engine re-manufacturers to provide natural gas conversions for existing in-use vehicles. John Reed, CEO of North American Repower, says, “Our market is mostly determined by a chassis’ ability to have tanks installed, CNG or LNG. We do all the application engineering needed so that the converted vehicle operates no differently than the diesel version. At this time, regional delivery fleets (goods or people) have the greatest ability to be fueled in an economic manner, both Class 5-6 and Class 8, so these fleets are our focus now.”
COMPRESSED NATURAL GAS
CNG (compressed natural gas) is natural gas compressed to less than 1 percent of its standard volume. Highly pressurized, CNG requires cylindrical storage tanks that are much larger than those used for diesel and must maintain the fuel at pressures of up to 3,600 psi. CNG vehicles are most prevalent in short-run transportation fleets.
CNG Advantages vs. Liquified Natural Gas
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Less expensive to produce
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Unlimited hold time (no fuel loss)
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Better developed technology
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Simpler fuel tanks and fuel management
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Customizable system design.
LIQUEFIED NATURAL GAS
LNG (liquefied natural gas) is created by cooling natural gas to -260 F at normal pressures, which condenses it into a liquid that is 0.0017 percent the volume of the gaseous form. LNG requires large, dense, super-insulated fuel tanks to keep the fuel cold. The greater energy density of LNG makes it more practical than CNG for long-haul trucks.
LNG Advantages vs. Compressed Natural Gas
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Greater driving range
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No expense for compression
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Much smaller storage requirement
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Lighter in weight.
PERFORMANCE REQUIREMENTS
NGV lubricants have some performance demands that are different than their non-NGV counterparts.
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They need to protect the engine against the range of pressure and temperatures typically found in NGV engines.
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NGV engines have a specific limit on phosphorus in order to protect the gas-to-liquid catalyst.
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Oxidation is less of a concern, but nitration is more of a concern, so lubricants need to have different ratios of antinitration and antioxidation additives.
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Because NGV engines tend to run hotter, the additives are prone to producing ash.
Corey Taylor, CLS, senior HD technologist for BP Lubricants USA, Inc., explains, “Many natural gas engines, both stationary and mobile, have different lubricant requirements than their diesel-fueled counterparts. A primary difference is the sulfated ash level, which is lower for NG engines. Many NG engine designs rely on some of the ash from burned lubricant to form a protective layer on the valve seat. Too much ash (say from a standard CJ-4 diesel engine oil) can cause buildup on the valves, leading to valve damage and, ultimately, destruction. Too little ash can cause the valves to prematurely wear the valve seat in the cylinder head, which will also reduce performance over time.”
But North American Repower has found a way around this. “A lot has been published on the use of different oils in natural-gas-fueled internal combustion engines, most of which centered around the role of ash content. Because we do not use catalytic converters, we can use a medium or normal ash content oil,” Reed explains. “We reserve using low-ash oils only for steady-state operation engines, like in our trailer refrigeration unit conversions. We have found, as have others, that valve recession or deposit buildup in variable speed engines just doesn’t seem to occur frequently. For us, it is more important to ensure the oil has adequate lubricity and cylinder wall adhesion to counter the dry fuel used in these motors.”
Taylor also addresses two other issues. “Another area of differentiation is in oxidation resistance,” he says. “NG engines tend to run hotter than diesel engines. This extra heat places thermal stress on the oil, leading to increased oxidation and all of the undesirable effects such as reduced oil life, sludge and deposits. A third area of difference is tied to dispersant chemistry. NG engines generate very little (if any) soot, so the amount of dispersant chemistry needed for optimum performance is reduced.”
Lubricants designed for stationary NG engines don’t work as well for vehicle engines, primarily because the level of antiwear additive in stationary engine oil is too low.
While there is no API standard for natural gas engines, engine manufacturers— including Cummins and Detroit Diesel—have set some specifications. NGV lubricant formulators also set performance standards. For example, Schaeffer Oil lists the following benefits for its Synthetic Plus CNG Engine Oil SAE 15W-40 (
8):
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A higher level of antiwear additives than conventional low-ash gas engine oils
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Wear protection for slider-follower diesel engines converted to CNG and LNG service
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An optimized balance of detergency and dispersancy to provide excellent piston and engine cleanliness
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Protection against deposit formation on the piston crown, combustion chamber and cylinder walls
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Protection against valve stem deposits and valve seat recession
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Nitration and oxidation control
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Thermal and oxidative stability and anticoking protection
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Superior low-volatility characteristics
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Excellent high-temperature/ high-shear performance in order to provide excellent oil film thickness at high operating temperatures and shear rates, while minimizing lubricant frictional resistance
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Shear stability for stay-in-grade performance throughout the entire oil drain interval
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Catalyst compatibility
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Minimization of hot spots formations that can lead to increased NO
X formation and catalyst poisoning.
As far as oil analysis for engines running on natural gas, Analysts, Inc., Suwanee, Ga., offers basic testing that includes 21 element spectrochemical analysis, FTIR that includes oxidation and nitration values, glycol and water content and viscosity at 100 C in cSt. The next level of testing includes acid and/or base number, depending on the oil type. For large engines with a high volume of lubricating oil in-service, they recommend both acid and base number testing.
THE FISCHER-TROPSCH PROCESS
The Fischer-Tropsch process, a key component of GTL (gas-to-liquids) technology, is a series of chemical reactions capable of producing a synthetic lubricant and synthetic fuel from natural gas. It was first developed by Franz Fischer and Hans Tropsch at Germany’s Kaiser-Wilhelm-Institut für Kohlenforschung in 1925. At the time, the shortage of oil in Germany propelled research into alternative ways of producing liquid fuels. Fischer and Tropsch developed a way to convert coal to syngas and then to liquid fuel. The process was further developed from 1948-1953 in Brownsville, Texas, and is now used commercially by Shell, Sasol and Mossgas.
CREATING LUBRICANTS FROM NATURAL GAS
The lubricant basestock resulting from the GTL (gas-to-liquid) conversion is ISO paraffin. Although the use of these ISO parraffin-based lubricants is in the early stage, they do appear to provide performance similar to Group III and Group IV basestock.
It’s not prohibitively costly to add Group III basestock production to existing GTL plants that are already producing fuel. Though conventional Group II basestock plants that employ hydrocracking and catalytic dewaxing could produce Group III basestock, it would require amping up the hydrocracker to the point that it would significantly reduce the yield.
Experts say that this enhanced production of Group III and Group III+ basestock will incentivize lubricant formulators to accelerate substitution of these materials into advanced formulations (
9).
Group I demand is expected to drop by 20 to 30 percent over the next decade. This, in turn, would hasten the closure of older, smaller Group I solvent plants in Europe and North America (
10). A side benefit of widely available GTL basestock is that it would allow smaller independent formulators to enter the market. The downside of the GTL process is that it is energy intensive, producing greenhouse gas emissions that are higher than those produced through convention petroleum processing (
11).
FEATURES AND BENEFITS
For starters, lubricants made from natural gas are so pure that they appear to be almost clear. While GTL basestock is similar to Group III PAO, it supersedes PAOs in areas that include pour point, viscosity index and oxidative stability. It also has almost no sulfur, nitrogen or aromatics and lower hydrocarbon emissions.
Royal Dutch Shell produced the first commercially viable GTL lubricant (
12). The product was developed at the company’s $19 billion Pearl GTL facility in Qatar and began production in 2012. In 2013, Royal Dutch Shell announced that its premium motor oils were then made using only base oil from Pearl. The company is currently producing the GTL lubricant, Pennzoil Platinum, at its blending plant in Houston. Shell says its GTL lubricant confers the following benefits (
13):
1.
Cleaner pistons
2.
Better fuel economy
3.
Horsepower protection
4.
Exceptional wear protection
5.
Excellent extreme temperature performance.
Shell’s NG lubricant was introduced into the consumer market last April and is currently being used in the Pennzoil NASCAR and IndyCar entries. STLE member Charles Gay, senior data analyst for Analysts, Inc., says that his company has not yet run across any lubricants made from natural gas in its labs.
Reed says, “The oils being developed from natural gas hold the promise of potentially specifying a lubricating oil on a nanotribology level so that the population of carbon chain lengths could be precisely determined, whether 100 percent of a single length or a precise mixture. It will be interesting to see how this could affect engine wear characteristics or oil life.”
THE GAS-TO-LIQUID PROCESS
The GTL process is comprised of the following two stages:
1.
Natural gas converted to syngas (synthetic gas). Natural gas is reacted with oxygen using proprietary catalytic partial oxidation. The end product is carbon monoxide and hydrogen syngas.
2.
Syngas converted to synthetic crude. The syngas is introduced into a Fischer-Tropsch-based reactor that contains a proprietary catalyst, converting the syngas into a fluid hydrocarbon.
LONG-TERM EFFECTS
Predicting the long-term effects that natural gas will have on the lubricants industry depends on being able to predict just how long this influx of shale derived natural gas lasts. Optimists claim more than 100 years (at the current rate of consumption), while others say as little as 11 years (
14). Factors to consider when predicting the future of natural gas include:
•
Not just the availability of natural gas but the continued availability of low-priced natural gas
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The price trend and price stability of petroleum
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Whether U.S. GTL facilities produce basestock
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Competition for capital from other emerging energy sources
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The state of mining regulations
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The state of environmental policies and politics
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Trade regulations
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Tax incentives.
While Shell has been leading the research and development of GTL lubricants, it’s telling that Royal Dutch Shell pulled the plug on its proposed Louisiana GTL plant in December 2013. The company’s media release reads, in part: “Despite the ample supplies of natural gas in the area, the company has taken the decision that GTL is not a viable option for Shell in North America at this time, due to the likely development cost of such a project, uncertainties on long-term oil and gas prices and differentials, and Shell’s strict capital discipline (
15).”
The Department of Energy forecasts that the U.S. will become a net exporter of natural gas by 2020 and that shale gas will account for 45 percent of the total U.S. natural gas supply by 2025 (
16). All of this points to 10-plus years of price instability as the market adjusts for fluctuating supply and demand.
Lubricant companies need to consider the risks and opportunities of participating in this market as these factors relate to their own business environments. According to a recent report by PricewaterhouseCoopers (PwC), considerations should include (
17):
•
Which new energy strategies to explore? How can the company best take advantage of shale gas availability?
•
How should the company allocate investment dollars among different fuel sources? Where will it get the greatest return in the short and longer terms?
•
Is the company employing the most effective and efficient sourcing strategies for energy and raw materials?
•
Should the company shift R&D and product innovation dollars to capture opportunities presented by the availability of shale gas?
•
Will the U.S. chemicals industry economics set off a round of protection among disadvantaged countries?
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What is the company’s global versus domestic strategy? What are the tax and transfer pricing implications?
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Which strategies for mergers, acquisitions and partnerships should the company be considering?
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How will shale gas affect the company’s supply chain in terms of cost reductions and risk parameters?
•
What are the new and emerging business models for industry value chain participants?
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How quickly will manufacturers’ strategic sourcing capabilities ramp up to capture and translate the lower costs of raw materials into their cost structures?
•
If consumer prices drop as a result of lower-priced fuel, how will that affect business?
•
What new commercial opportunities are emerging, and how should the company price its products?
The main barrier for widespread adoption of natural gas-powered vehicles is the lack of a refueling infrastructure and the high price of creating one.
www.canstockphoto.com
Taylor says, “At BP we believe that a diversified mix of energy sources is a benefit to consumers and the U.S. economy. The dramatic changes in the U.S. energy market in the past few years have created a growing demand for natural gas as a transport fuel, and we will continue to look for ways to innovate in this space in a manner that delivers value for our customers.”
Gay concludes, “Based on the industries we are involved in, natural gas, as an energy source, appears to be the go-to supply source. In the near future, diesel engine conversion or replacement with natural gas as the fuel source should expand rapidly once the fuel distribution capabilities expand.”
He continues, “Emissions regulation also will be a major influence in the conversion from diesel as a fuel source. The demand for cleaner-burning diesel fuel will be more costly than using natural gas, not only due to the increased cost in the clean-burning diesel fuel production but also the increase in the technology required from the diesel engine manufactures to meet more stringent emission requirements. But the use of diesel fuel or fuel oil will not go away.”
REFERENCES
1.
From: click
here.
2.
Per the U.S. Energy Information Administration.
3.
A list of chemicals used during the hydraulic fracturing process: click
here.
4.
From: click
here.
5.
From: click
here.
6.
From: click
here.
7.
Watch LNG refueling video at: click
here.
8.
From: click
here.
9.
GTL basestocks are referred to as Group III+, or Super-Group III.
10.
From: click
here.
11.
From: click
here.
12.
Shell owns the Pennzoil and Quaker State brands.
13.
From: click
here.
14.
From: click
here.
15.
From: click
here.
16.
From: click
here.
17.
From: click
here.
Jeanna Van Rensselar heads her own communication/public relations firm, Smart PR Communications, in Naperville, Ill. You can reach her at jeanna@smartprcommunications.com.