Passenger Car and Heavy-Duty Diesel Oil Performance Demands

and Evolutions – An Asian Perspectives

Indonesia Fuel & Lubes Conference 2007, JakartaMonday 26th & Tuesday 27th November 2007

Jason ChongProduct Manager, Engine Oil

§ Market drivers

§ Evolution of lubricant requirements

§ The Asian marketplace

Contents

Market Drivers

2. Increased fuel economy requirements

3. Durability under severe operating conditions

1. Changing emissions legislation

Engine Oil Market Drivers

There are 3 main factors affecting the engine oil market:

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

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

§ Other direct and indirect effects of particulates and oxides of carbon,nitrogen and sulfur are affectingthe global environment.

§ Globally, there is a range of emissions limits.

Global Need to Focus on Air Quality

Europe

EU driven

ACEA:Passenger car –A/B,C§ Diesel oil/ motor oil§ Durability§ Fuel economyHeavy-duty diesel - 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

Passenger car motor oil - ILSAC GF-4§ Fuel economy§ Durability

Heavy-duty diesel - API CJ-4 § DPF focus§ Durability

Global Emission and Lubricant Structure

Overview of Legislation Introduction - AP

E1

E2

E3

E4

- Euro 1- Euro 2

- Euro 3- Euro 4

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

E4

E4

§ Demand for increased fuel-efficient engine oils is driven by: § Lower CO2 emissions

(Kyoto Protocol)§ Lower fuel consumption§ Lower cost of ownership

Over the last 10 years the use of fuel-efficient engine oils has increased dramatically

Fuel Economy

§ Increased oil drain intervals § Driven by reducing waste oil§ Lowering cost of ownership

§ More severe operating conditions§ New engine designs§ New aftertreatment systems§ New types of fuel (e.g., biodiesel)

§ Engine oils are required to function under increasingly severe operating conditions

DurabilityThe performance demanded from engine oils has increased dramatically over the past decade

Evolution of Lubricant Requirements

Euro 4

Euro I

Euro 2

Euro 3

Par

ticu

late

s

NOx

Turbochargers and intercoolers

Fuel changes

Retarded injection, piston design changes

EGR

CRTOXICAT

De-NOx CAT

SCR

Engine Design

Aftertreatment

Emissions legislation has led to new engine designs and aftertreatment systems

Evolution of Hardware vs Emissions

Emissions

Euro 4 emissions legislation is leading new engine designs and aftertreatment systems

Impact on engine design

Euro 4Euro 3Euro 2Typical design solution

DIIDI + DIIDIEngine designDiesel

PFI + GDIPFIPFIEngine designGasoline

TWCTWCTWCAftertreatment system

Aftertreatmentsystem

-EGR or

EGR/DPF or SCR

EGR

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

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

EmissionsImpact of engine oils on aftertreatment devices

SulphurPhosphorusAsh

ü--NOxNOx Adsorber

üü-DOCDiesel Oxidation Catalyst

--üDPFDiesel Particulate Filter

-ü-TWCThree-way Catalyst

ü--LNCLean NOx Catalyst

SCR -

Fluid-related constraint

Selective Catalytic Reduction ??

Aftertreatment device

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

Sulphated Ash Phosphorus Sulphur

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

Typical Euro 3 1.2% 1100-1300ppm >5000ppm(ACEA E5)

Typical Euro 4 (ACEA E6) 1.0% <800ppm <3000pm

Impact of Elemental Restrictions

Increased Complexity Throughout the “Food Chain”

Along with hardware, engine specifications are becoming increasingly complex

Pre-Euro Euro 4

Euro 4/5 Passenger Car Performance Demands

OEM desires:

• Fuel economy

• Emissions

• Reduced sludge

• Increased piston deposit performance

• Turbo-chargerperformance

• Biodiesel compatibility

Formulating requirements:

• Lower viscosity grades only if fuel dilution and wearconcerns addressed

• Lower SAPS

• Improved performance from:

• anti-oxidants• detergents• dispersants

Euro 4/5 Heavy-Duty Diesel Performance Demands

OEM desires:• Aftertreatment compatibility

• Fuel economy

• Soot handling

• Corrosion control

• Increased piston deposit performance

• Turbo-chargerperformance

• Biodiesel compatibility

Formulating requirements:

• Lower SAPS

• Improved soot dispersancy

• Improved soot-related wear

• Improved oxidative stability

• Improved corrosion inhibition

• Improved deposit performance

The Asian Marketplace

A Highly Fragmented Market

AP PC Performance Tiers

0%10%20%30%40%50%60%70%80%90%

100%

China

India

Indon

esia

Thaila

nd

Malaysi

a

Philipp

ines

Vietna

m

Singa

pore

Taiwan

S. Ko

rea Japa

n

<SF SG/SH >SJ

AP HD Performance Tiers

0%10%20%30%40%50%60%70%80%90%

100%

China

India

Indon

esia

Thaila

nd

Malaysi

a

Philipp

ines

Vietna

m

Singa

pore

Taiwan

S. Ko

rea Japan

CC/CD/CF CF-4 > CG-4

Wide range of performance,

from CC to CI-4 PLUS and DH1/2

in Japan

SF is still dominant in developing

markets, with SL/SM/GF-4

in Japan/Korea

A Highly Fragmented Market

Viscosity Grade Profile PCMO – Asia Pacific

0%

20%

40%

60%

80%

100%

Austr

alia

Chin

aIn

dia

Indo

nesia

Japan

Malay

siaPh

ilippi

nes

Kore

aSin

gapo

reTa

iwan

Thail

and

Monogrades 20W-40/20W-50 15W-4010W-30/10W-40 5W-20/5W-30 Other Multigrades

Viscosity Grade Profile HDDO – Asia Pacific

0%

20%

40%

60%

80%

100%

Austr

alia

China Indi

aInd

ones

ia

Japan

Malay

siaPh

ilippin

es Korea

Singa

pore

Thail

and

Taiw

an

Monogrades 15W-40 10W-30/10W-4020W-40/20W-50 Other Multigrades

Regional preferences

dominate

Monogrades are still a staple in hotter climates

Different Fuel Quality Levels

2007 Diesel Sulfur Limits in Asia

Biodiesel Industry: Total Biodiesel Demand - Asia Pacific 2006-2011

Note: All figures are rounded; the base year is 2005. Source: Frost & Sullivan

Different Operating Conditions

The more the merrier

Different Needs Leading to Potentially Different Vehicle Markets

0%10%20%30%40%50%60%70%80%90%

100%

Europe USA Asia Pacific

Passenger Car Light Commercial Vehicle Heavy Trucks Buses

Henceforth…§ Right product for the Right application is

important

§ For example, although diesel fuel sulfur has reduced over time, there still need to be a focus on TBN§ Detergent is used not just to neutralize fuel

and oxidation related acids. It has other functions such as piston cleanliness.§ Concerns over alternate fuels.

§ Possibly different service intervals

§ Engine Oils will be required to deliver performance inü Extended durabilityü Fuel Economyü Emissions

§ Convergence of these drivers results in an increase in the performance requirements for an engine oil

§ In Asia, a highly fragmented market will require proper formulation of lubricant to achieve the desired performance , taking in account all of the requirements with regards to acid control, shear stability, materials compatibility and compatibility with any exhaust after-treatment

Summary

Thank you for your interest and attendance