Global Lubricant Development

Dr. Mark ReesLubrizol Corporation

Market Drivers

Evolution of Lubricant Requirements

Summary

Scope of Presentation

Market Drivers

Widespread analysis indicates that urban air pollution in Asia has and will continue to cause ill health.

Global estimates indicate that annually 220-570,000 deaths are associated to airborne particulate matter.

Other direct and indirect effects of particulates and oxides of Carbon,Nitrogen and Sulphur are affectingthe global environment.

Globally, a range of emissions limitshave been established.

Global Need to Focus on Air Quality

Estimates vary, but in 15 years the world's vehicle population is expected to double from where it was in 2005.

Automobile Industry Growth

0

200

400

600

800

1000

1200

1400

2005 2010 2015 2020

Mill

ion

Vehi

cles ROW

JapanEUUS

Engine Oil Market Drivers

There are three main factors are affecting the global engine oil market:

Global Lubrication Drivers

Europe

EU Driven

ACEA:

PC – A/B, C• PCDO / PCMO• Durability• Fuel Economy

HDD - E• SCR and DPF• Durability

Asia

Country Specific

Strong 2-Wheeler market

Euro norms are acommon base..

API focused

Japan GF-4, DL-1, DH-2

North America

EPA Driven

PCMO ILSAC, GF-4• Fuel Economy• Durability

HDD – API, CJ-4 • DPF focus.• Durability

Global Lubrication Drivers

Europe

EU Driven

ACEA:

PC – A/B, C• PCDO / PCMO• Durability• Fuel Economy

HDD - E• SCR and DPF• Durability

Asia

Country Specific

Strong 2-Wheeler market

Euro norms are acommon base..

API focused

Japan GF-4, DL-1, DH-2

North America

EPA Driven

PCMO ILSAC, GF-4• Fuel Economy• Durability

HDD – API, CJ-4 • DPF focus.• Durability

Global Lubrication Drivers

Europe

EU Driven

ACEA:

PC – A/B, C• PCDO / PCMO• Durability• Fuel Economy

HDD - E• SCR and DPF• Durability

Asia

Country Specific

Strong 2-Wheeler market

Euro norms are acommon base..

API focused

Japan GF-4, DL-1, DH-2

North America

EPA Driven

PCMO ILSAC, GF-4• Fuel Economy• Durability

HDD – API, CJ-4 • DPF focus.• Durability

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Australia

Bangladesh

Cambodia

Hong Kong

India

Indonesia

Malaysia

Nepal

Philippines

China

Singapore

Sri Lanka

Taipei

Thailand

Vietnam

E4E3E1

E1

E2

E2

E2

E2E1

E1

E1

E1

E1

E1

E2

E2

E2

E2

E3

E3

E3 E4

E4

E4

E1

E3

Asia - Legislation Introduction

Impact of particulate emissions reduction

2000 kg

Euro 1 Euro 4

120 kg

Mass of particulates possible from a truck during its life

Emissions

Evolution of Lubricant Requirements

EURO 4

EURO I

EURO 2

EURO 3

Part

icul

ates

NOx

Turbochargers & Intercoolers

Fuel changes

Retarded injection, piston design changes

EGR

CRTOXICAT

De-NOx CAT

SCR

ENGINE DESIGN

AFTERTREATMENT

Evolution of Hardware vs Emissions

EmissionsImpact on engine design

Typical design solution Euro 2 Euro 3 Euro 4

Gasoline Engine design PFI PFI PFI + GDI

Diesel Engine design IDI IDI + DI DI

Aftertreatment system TWC TWC TWC

Aftertreatment system - EGR EGR/DPF/SCR

KEY Engine design types Aftertreatment system typesPFI Port fuel injection gasoline TWC Three-way catalystGDI Direct injection gasoline EGR Exhaust gas recirculationIDI Indirect injection diesel DPF Diesel particulate filterDI Direct injection diesel SCR Selective catalytic reduction

• Changes in market requirements result in new engine oil technology being developed

How new engine oils evolve

Environmental and market drivers

New engine designsand aftertreatment systems

Demand for higher quality lubricants to effectively lubricatenew engine designs and protect new aftertreatment systems

Lead to

Which results in

The requirements of which are definedin new engine oil specifications and results in

The development of new engine oil technology

• A mix of data is currently being published regarding the impact of engine oils on aftertreatment devices

Emissions

Aftertreatment device Fluid-related constraint

Ash Phosphorus Sulphur

Diesel Particulate Filter DPF X - -

Diesel Oxidation Catalyst DOC - X X

NOx Adsorber NOx - - X

Three-way Catalyst TWC - X -

Lean NOx Catalyst LNC - - X

SCR -Selective Catalytic Reduction ? ?

• Chemical composition ranges of Heavy Duty Diesel lubricants

• To meet the severity needs of today’s engines - these restrictions will have a major impact on lubricant formulation strategies

Impact of Elemental Restrictions

Sulphated Ash Phosphorus Sulphur

Pre Euro 1.8% 1100-1300ppm >5000ppm(ACEA E3 or CCMC D5)

Typical Euro III 1.2% 1100-1300ppm >5000ppm(ACEA E5)

Typical Euro IV (ACEA E6) 1.0% <800ppm <3000pm

The global industry has introduced new specifications, which have stressed:

• Chemical limits for after-treatment durability.• No reduction of engine performance with Low SAPS lubricants

Chemical limits will require new approaches to meeting wear, oxidation and deposits:

• Application of new additive components

• Use of low sulphur base oils eg. Gp. II, Gp. III

Exhaust After-Treatment Durability Effect on Lubricant Formulations

Along with hardware – Engine specifications are becoming increasingly complex

Increased Complexity Throughoutthe “Food Chain”

Pre-Euro Euro IV

The Rise of Oil Development Complexity

Test Cost (First Time Passes)

0

100

200

300

400

500

600

1955CD

1983CE

1990CF-4

1994CG-4

1998CH-4

2002CI-4

2004CI-4+

2006PC-10

US$

(000

)

• If it is complex for us – what about the end user who may see issues rather than benefits?

• Low emission engine technology will require more sophisticated lubricants

• Lubricant costs will remain as a minor segment to the end user versus the value can they offer, Durability, Fuel Economy, etc…

• How do we demonstrate value to the End User?

Implications of Low Emission Developments

Source: CIRT 2002-3

81%

2%

17%

Fuel ( Diesel ) Lubricants Auto Spares

STU – Material Cost Break up

• After-Treatment durability• Maintenance / Durability• Fuel Economy

So what are some of the Benefits ?

• Fuel Economy• CAFE• Monetary savings• Carbon Dioxide Emissions

So what are some of the Benefits ?

• Durability

• Maintenance / reliability• Engine wear• Engine deposits• TBN depletion• Bearing corrosion• Motorcycle gear wear• Engine cleanliness

So what are some of the Benefits ?

CH-4 ChemistryCG-4 Chemistry CF-4 Chemistry

• Sludge / Soot control

CF-4 30,000 mile drains, CG-4, CH-4 50,000 mile drains

Summary

Rate of introduction of new technology is increasing

Support is needed for more sophisticated hardware, software and lubricants:

Increased vehicle costs, especially with the addition of exhaust after-treatment devicesDurability and maintenance challenges of new hardwareThe maintenance of higher performance engines / vehicles may focus on OEM dealerships / service centers and change conventional channels to marketContinuous up-gradation of lubricant quality levelsIncreased need to focus on end user education

Implications for Asian Market

There is a both a focus and a need to improve air quality globally.

Multiple and significant challenges exist to both achieve and implement these improvements.

The value of lubricant technology should be recognized in enabling these goals.

Summary

Thank you for your interest and attendance