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Conventional & Unconventional Gas Trends in Latin America -Impacts on Lubricants

Marcos DaviJuly 01st, 2015

Presentation Contents

Brief Oronite Introduction

What´s Natural Gas

Gas Market Trends in Latin America

• Natural gas resources, policy initiatives

for unconventional & non-natural gas utilization

Brazil & Argentina Overview

Emission & Dual Fuel Trends

OEM Trends

Impacts on Lubricants

• The Oronite® brand name has been synonymous with specialty petroleum-based products since 1917 when it was part of Standard Oil Company of California (SOCAL).

• Oronite evolved into a truly global business after the successive formation of non-U.S. Joint ventures (JV), JV buy-outs, building the Singapore manufacturing plant and strong organic growth.

• New technology is the lifeblood of the business.

Oronite – Almost 100 Years Old

®

®

3

Oronite – A Heritage of Innovation

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

1917Global fuel and lubricant additives company was established

2004First fully qualified ILSAC GF4 product

2005Patented additive technology for new generation of low emission diesel engine oils

Polybutene-based dispersant for CJ-4

2008Patented Marine Trunk Piston Engine Oil Carboxylate Technology

First railroad oil additive formulated for low sulfur fuels

1935First diesel fuel additive

1938First compound oil for diesel locomotives

1941First detergent oil for passenger cars

1954Revolutionary gasoline additive to keep carburetors deposit free; first thermally stable phenate additives for marine engine lubricants

1960Dispersant for natural gas engine oil

1980Fuel additive specifically for unleaded gasoline cars

1984First engine oil formulation for Group II base oils

1989Additive for multi-grade diesel locomotive engine oil

1920’sIntroduction of Zerolene F, an anti-chatter additive used to lubricate fabric transmission bands in the historic Model T Ford

1998Introduction of Polyether carrier fluids

1998Oronite acquired the PARATONE®

viscosity index improver business

1999Built Asia’s first world-scale lubricant additive plant in Singapore

2000Oronite became wholly owned subsidiary of Chevron Corporation

4© 2014 Chevron Oronite Company LLC. All rights reserved

What is Natural Gas?

Typically a major portion of methane with lesser

quantities of longer chain hydrocarbons such

as - ethane, propane, butane, etc…

Wellhead, Landfill, Digester, Pipeline, Shale Gas, mine gas or coal

seam gas, etc…

Some inert constituents of natural gas are –

carbon dioxide, nitrogen, hydrogen sulfide, etc…

Shorter chain hydrocarbons generate

higher energy per weight % fuel

Pipeline quality natural gas typically contains 90

% + of methane

Digester and Landfill gas with much lower

Methane content (50%)

Presentation ContentsBrief Oronite Introduction

What´s Natural Gas






OEM Trends


Remaining Natural Gas ResourcesGrowth will be sustained by Unconventional

7© 2013 Chevron Oronite Companies. All rights reserved.

Global Shale Gas Resources

U.S. Energy Information Administration | Technically Recoverable Shale Oil and Shale Gas Resources, 2013

Policies & Regulatory InitiativesNon-Conventional Fuel Sources

Increased non-

conventional gas

utilization

“Gas Plus Program” implemented for promoting exploration of non-conventional sources•More than 50 projects approved•Investment of approximately US$ 4.2 billion

“National Policy for Solid Residues” converting dumps to landfill sites

Developers to Expand in Peru After 2015 Renewable Power Auctions (Biomass included)


What´s Natural Gas






OEM Trends


Argentina Overview (1/2)

Energy economy largely dependent on hydrocarbons (~88%)

Drive to restore self sufficiency in hydrocarbons

• Became net gas importer in ~2008

• Became net oil importer in ~2012

Recent legislative changes to accelerate shale oil and gas development

• Investment from

o CNOOC, Sinopec, Gazprom

o Chevron, Shell, Others

• Shale reserve estimates

o Oil, 27 Billion Barrels

o Gas, 802 TCF

Argentina Overview (2/2)

Shale overview

• Initial development is in the Vaca Muerta shale (Neuquen Basin) focusing on oil rich areas

o Loma Campana, and Loma La Lata areas are already producing ~30,000 bbl/day of oil and 4 million cuft/day of gas

• Initial vertical wells have been logged to provide geologic maps for placing horizontal wells

• Well drilling and completion costs are initially high, but expected to drop to NA norms when geological mapping is defined, and pad drilling techniques are used

Brazil Overview (1/2)

Brazil is the 8th largest total energy consumer and 10th largest producer in the world

ANP estimates Brazil has 15.6 billion barrels of proved oil reserves (2013)

The largest importers of Brazilian crude in 2013 were;

• China, 115,000 bbl/d

• US, 110,000 bbl/d (however the US exported 179,000 bbl/d of petroleum products to Brazil in 2013)

• India, 49,000 bbl/d

Brazil Overview (2/2)

Even though the ANP estimates that, at the end of 2013, Brazil had an estimated16 TCF of proved natural gas reserves, second in South America after Venezuela, consumption still exceeds production.

WORLD LNG ESTIMATED SEP 2014 LANDED PRICES Gas Price : A challenge for LA industry growth!

Source: Waterborne Energy, Inc. Data in $US/MMBtu

Investments on stationary power plants & increase of gas usage in mobile & transport applications

Incentives on Biomass,

Landfill & Renewable

Souces

Argentina´s & Global

Shale Gas Reserves

Brazil´s Pre-Salt &

Onshore reserves


What´s Natural Gas






OEM Trends


© 2014 Chevron Oronite Company LLC. All rights reserved.

Burn cleaner than diesel with no particulate emissions NOx – nitrogen oxides, a “criteria” pollutant

Primarily a mixture of NO and NO2 in exhaust

Toxic, precursor to ground level ozone, and photochemical smog

CO – carbon monoxide

Toxic

Precursor to photochemical smog

Hydrocarbons (VOC) Methane, other hydrocarbons, and HAPs

(hazardous air pollutants)

Precursor to photochemical smog

Emissions – PollutantsGas Engines

Possible Future Trends-Dual Fuel

A seismic shift is underway in the diesel engine market place which will have profound effects on the lubricant and additives businesses

Three major segments impacted - Change is driven by large price differential between diesel fuels and natural gas on an equal energy content basis, but fueling infrastructure limited

1. Marine

Deep Draft (freighter, tanker)

Trunk Piston (workboats, ferries)- very active area in Europe and NA

2. Automotive (on-road)

Heavy Duty (truck and bus)- primarily SI so far

3. Off Road

Railroad- FRA holding up the show in NA

Inland marine- strong interest, testing

Oil and Gas Industry- rapidly moving into drilling and fracturing fleets

Mining Industry- gaining traction

Dual Fuel - Lubricant ConcernsSome Examples Soot Effects

Lower dispersant requirement

Excess dispersant from diesel engine oils may

Increase water retention, emulsion formation and nitration of excess aminic material

Lower soot wear may also result in different anti-wear appetite and shift in UOA metals

TAN

Could be better (low sulfur)

Could be worse (oxidation/nitration)

TBN

High probability of lower TBN requirements

High ash may result in combustion chamber deposits (Knocking, Valve issues)

Engine Market TrendIndustry Consolidation

GE acquires Dresser Inc. (Waukesha Engine)• Previously acquired

Jenbacher

Caterpillar acquires MWM• Previously acquired

• MaK• Perkins

Dresser-Rand acquired Guascor• Dresser-Rand is now

to be acquired by Siemens

Previous acquisitions are still being “digested”No major changes in approval processes yet

But are sure to come


What´s Natural Gas






Gas Engine Trends


Diesel Vs. Gas Engines On the Lubricants & Additive Perspective!

Die

sel Engin

e O

il Additiv

e • Soot Dispersancy• Piston Deposits• Valve Train Wear

• Higher Zinc• Corrosion Control (Fuel S)• Higher Ash (0.8-1.0% ash)• Higher Phosphorus (>800

ppm)• API performance

designation

Gas

Engin

e O

il

Additiv

e • Oxidation/Nitration Control• Valve Seat/Guide Wear

Performance• Low Combustion Chamber

Deposits• Minimize Spark Plug Fouling• Minimize Piston Deposits• Catalyst Compatible

• Low ash (~0.5% ash)• Low Phos & Zinc (<300ppm)

• Performance measured by field performance

Landfill Gas ApplicationIncreasing Severity on Lubricants

• LFG : A by-product of the decomposition of organic solid wasteo ~50% Methane; ~50% CO2; <1% organic compounds

o Normally saturated with water and contains contaminants such as HCl, HF, H2S, Siloxanes

• OEM Recommendation to Minimize Harmful Effectso Engine configuration Corrosion resistant metallurgy / Higher engine operating temperatures

o Maintenance practices Shortened oil drain intervals Routine gas analysis / Regular and careful spark plug maintenance

• High BN lubricants specifically formulated for Landfill Gas applications

Relative ease of meeting strictest emissions levels with three way catalyst may lead to more large stoichiometric engines (new Waukesha P9394GSI)•High nitration•May require EGR•Maximize engine volumetric efficiency•Lowest possible emissions

•Comparatively high cost of SCR may push adoption of the above trend

OEM Trends for Conventional NGIncreasing Severity on Lubricants

High BMEP Engines•Increased knock sensitivity•Combustion chamber deposits•Oil mist/vapor can cause pre-ignition

•Steel pistons with high set rings needed for high pressures and temperatures•Higher temperature and pressure in ring belt•Groove and land deposits•Oxidation and nitration

•High under crown temperature•Under crown varnish/deposit

Thank You!

A Global company with nearly 100 years of experience

Market leadership in several major product segments

Strategically positioned and aligned for Future Growth

Technology and Innovation are the lifeblood of our business

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