Sparking the Transformer Oil Market

2012-06-08   来源:润滑油情报网 网友评论 0


  As the economy recovers from the recession years, the electrical oil market is expected to grow. Even before the U.S. market gains momentum, naphthenic base oil refineries — the source of most transformer oils — could see opportunities in global emerging markets, Mike Burnett of process oil marketer Renkert Oil told Lubes’n’Greases.

   Together, North and South America consume around 360,000 metric tons per year of electrical oil, while the European market consumes 225,000 metric tons and will grow around 20 percent by 2015, Burnett estimated. “Currently, Asia [excluding Russia] is a global leader in electrical oil consumption,” he said. Asia also takes the lead in projected growth, with a potential market of over 750,000 t/y by 2015.  

   North America has a distinct electrical, insulating and switchgear oil market, with deep ties to global OEMs, said Burnett, who is managing director for international sales at the Morgantown, Pa.-based Renkert Oil. He joined the company after 30 years with base oil refiner and   transformer oil producer Ergon Inc.

   The largest naphthenic volumes used as electrical oil for the U.S. market are produced by Ergon in Vicksburg, Miss., and by Petroleos de Venezuela in Curacao, Netherlands Antilles, with the latter’s output marketed by Sweden’s Nynas. There are a number of smaller producers scattered elsewhere around the globe, including PetroChina, he said, adding, “Some naphthenic producers which are not really global suppliers ship occasionally on a global level.”

   As the world’s largest naphthenic base oil refiner, Ergon has a big stake in this market segment. “We see competition primarily from traditional suppliers who are working diligently to add production capacity,” said Craig Busbea, Ergon’s marketing vice president for   North and South America. Ergon itself completed a large expansion last year. “Additionally, the company has improved its operations to add another 15 percent capacity within the past few months. Even more capacity is slated for next year,”     Busbea confirmed.

   Three years ago, a booming U.S. developmental sector contributed to the rise of electrical oil production. “Although the production volumes today are not the same as in 2007, the electrical oil market did see some recovery in the second half of 2009,” Burnett said.

   The market is still feeling   the pain, said Ryan Eberly, director of sales and marketing at naphthenic producer San Joaquin Refining in Bakersfield, Calif. In August 2009, U.S. demand for transformer oil amounted roughly to 7,000 barrels per day, compared to around 5,000 b/d in August 2010, he said.

   “This year the demand has significantly dropped and we’ve been forced to export around 20 percent of our total electrical oil production   to countries such as India, China or South Africa,” Eberly stated, adding that usually the San Joaquin refinery is not an exporter; for the last 12 years, all its volumes were sold domestically. “But as long as the U.S. market hesitates, we would consider expanding in places like South Africa or China, where they appreciate   our products. Of course, we would stay loyal to our domestic customers as well.”

   Electrical oil demand primarily is influenced by the commercial marketplace for medium- and high-voltage transformers used for building new power stations or upgrading existing ones, and by expansion of the residential power grid, these experts said. “I don’t think that it is directly proportional   , but when the construction market is down, the demand for transformer oil is down as well — they are definitely tied together,” Eberly commented.

   Geographically, the biggest U.S. transformer oil markets are southern states like Georgia, Mississippi, Texas and Missouri, where the OEMs who build transformers   have opened plants to take advantage of lower labor costs. “A small portion of demand comes from the utility companies, while the largest consumers are the transformer manufacturers like Cooper Power, ABB or Siemens,” Burnett said, adding that such OEMs are really the drivers of transformer oil demand.

   Growth of the insulating oil market was hobbled by the financial crisis and subsequent   recession. The subprime mortgage crises and crash of residential development in 2008 dragged the transformer oil market down, and it is still recovering from the blow. “Since the end of 2009 we observe signs of recovery,” Burnett commented. “The industrial portion of the market was affected by the slowdown   too, but not as severe as the residential.”

   Some future growth could be spurred by recent legislation that prods U.S. utility companies to update the power grid. “There are several metropolitan areas with multimillion populations, where the grid has to be improved,” he went on to point out. “It would be a good prospect for electrical and transformer oil growth     in the country.”

   On the other hand, electrical oil demand is already growing rapidly in the emerging markets of China, India and Brazil, countries where booming development, including electrification of huge rural areas, is attracting numerous   investors. “Brazil for example is planning to install three huge electric power plants in order to electrify the country in its whole territory — that’s a potential market for new transformers,” he said. While these are long-term projects slated for the next 15 to 20 years, they’ll provide a huge boost for transformer oil demand.

   Ergon likewise is optimistic about the growing demand for naphthenics. “Our challenge is to increase production capacity at a rate that keeps up with the growing demand,” Busbea remarked. “Today we see a global balance, but would love to have a reason to add even more capacity.”

   The transformer oil market   is driven by specifications, not simply by the type of oil produced. The refinery process determines the oil’s electrical, physical and chemical properties, but OEMs call the shots. They require oils to have good purity, high dielectric strength, and low viscosity for cooling. Oxidative and   thermal stability are also important for long product life, and compatibility with other transformer materials is a must.

   “Naphthenics were used in the past primarily for their low pour-point viscosity properties. Now, with API Group II base oil technologies, some companies like Petro-Canada are producing excellent paraffinic transformer oil,” Burnett explained. “Paraffinics are used mostly for the heavy electrical equipment that operates in warm regions with no need of low pour requirements.”

   And there could be other alternatives someday if the market needs it. “There are     some companies on a very small scale producing bio oils for transformers. Due to some issues, they have not found wide acceptance, but in the future they could be another source of supply.”

   Specifications top the list when a buyer asks for this product, Eberly said, with the key spec being the ASTM D3487-09 standard for mineral insulating oils. This document divides the fluids into two main types: Type I transformer oils — with no additives — for apparatus where normal oxidation resistance is required, and Type II oils which can be additized if greater oxidation resistance is needed.

   II “Canada introduced a particular specification called CSI/C50, and anybody who sells transformer oil [there] has to guarantee that it meets this spec,” Eberly said. “It’s similar to the U.S.   specification, but has slight differences that prohibited U.S. producers from selling in Canada. But that’s not a good thing. Because of a shortage of supply, a lot of Canadian companies recently began to accept the ASTM specification.”

   There are also a few European specifications, from the International Electrotechnical Commission and the British Standards Organization (BS-148), and some of these also do not allow use of additives. “You don’t put additives in the transformer oil to improve its quality. It’s based on the specification stipulated by the utility company and the oil producer   ,” Burnett emphasized. “The specifications are going to limit what you can do in a blending plant and what types of additives you may or may not use to improve pour point or flash point. It’s a very specification-driven business and we don’t consider it as a commodity.”

   Transformer oil is definitely not a commodity in the traditional sense of the word. Although some product is sold through distributors and marketers, the greatest volume goes on a direct basis from the refinery gates to the electrical distributor or transformer producer as the buyer. “You don’t see as much trading here, although there are some traders who buy and sell even electrical oil,” Burnett asserted.  

   Insulating oil is a complex product, agreed Eberly. “It really requires an expert to sell it and proper technicians, laboratories and equipment to handle it. Refineries have the technical expertise and capability to know what’s going to work and why,” he said, adding that it’s not like the pale oil that meets only five or six requirements and usually is sold for lubricant blending.

   In general, these experts insisted that the insulating oil market is improving and that they expect demand to exceed supply in the coming years, just as it did before the economic crisis. “Whenever demand is higher than supply, we will look to increase capacity as other majors, like Ergon, already did,” Eberly concluded. 



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