Low Sulfur Diesel Requires Improved Lubricity for Engine Performance

Low Sulfur Diesel Requires Improved Lubricity for Engine Performance - Opens
New Markets for Fuel Additives

HOUSTON--October 6, 2005--Researched by Industrialinfo.com (Industrial
Information Resources, Incorporated; Houston, Texas). Department of Energy
regulations for sulfur content in diesel fuel were lowered from 5,000 parts
per million (PPM) to 500-PPM in 1993. This was to prevent harmful emissions
from engines. Now, new regulations state that sulfur in diesel fuel should
be lowered to 15-PPM in 2006. Most refineries are in the midst of this
conversion, or will be complete in 2006. In most cases, a hydrotreating
process unit is added to the refinery to achieve the necessary reduction a
cost of billions of dollars to the industry.

The removal process reduces nitrogen and aeromatic compounds, as well as
sulfur and its compounds. These components provide lubricating qualities, so
that fuel pumps will not fail in diesel engines, and so the nozzles that
spray fuel into combustion chambers will not be clogged.

Industry analysts expect a large market for diesel fuel additives will
develop in order to overcome difficulties arising due to the increased use
of low-sulfur diesel. Industry consensus is that all highway diesel fuel
will contain lubricating additives. Diesel trucks and cars annually consume
40 billion gallons of fuel on U.S. highways. The addition of just 100-PPM of
a lubricity agent to a gallon presents a 40 million gallon market for
chemical suppliers that would be worth millions of dollars (depending on
lubricant content and price of lubricant).

The candidate lubricants are mostly based on natural fatty acid derivatives.
Synthetic esters are also under consideration, but are more expensive. One
fatty acid compound that performs well in engine tests and is readily
available is "bio-diesel" - a fatty acid methyl ester. This compound is
effective to restore fuel lubricity at a 20,000-PPM level, or 2% content. A
variety of fatty acid amides and esters are effective lubricants at a much
lower level in the 50 to 500-PPM range It seems doubtful that bio-diesel
will capture much of the lubricant business due to high loading requirements
and manufacturing capacity restraints. Uniquima and Cognis are making other
amides and esters and plan to capture market shares.

The same pipelines that carry diesel fuel from refineries to distribution
terminals (called "racks") also carry other fuel, such as gasoline and jet
fuels. Many pipeline operators have banned the addition of diesel lubricity
additives for fear of contaminating other fuels. There are 2,000 of these
terminal operators and they all must add lubricity agents into diesel before
it is delivered to customers. There is an apparatus known as "High Frequency
Reciprocating Rig" (HFRR) that will indicate how much additive to add in
order for the diesel to operate effectively in diesel engines. A terminal
operator can independently choose its additive supplier and add the agents
to meet fuel standards. This offers marketing opportunities for additive
suppliers. The supplier of the HFRR instrument is PCS Instruments, who has
already sold 600 instruments at about $50,000 each.

Industrial Information Resources (IIR) is a Marketing Information Service
company that has been doing business for over 22 years. IIR is respected as
a leader in providing comprehensive market intelligence pertaining to the
industrial processing, heavy manufacturing, and energy-related industries
throughout the world.

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