Shell Lubricants, a global manufacturer of finished lubricants, recently launched two grades of hydraulic oils -Shell Tellus S2 MX and Shell Tellus S2 VX. Making India as the launch pad for these futuristic hydraulic oils, the company plans to leverage the growing demand from the new and emerging markets in the region and across the world. Hans Gerdes, Shell Tellus Brand Manager, Shell Lubricants, and Akhil Jha, Vice President Technical, Shell Lubricants India, shared their views with T Murrali of AutoParts Asia on the speciality of these new hydraulic oils and other lubricants, and on Shell’s dynamic efforts to bring to the world market stronger and better products in tune with the changing needs. The edited excerpts:-
Q: You have made India the launch pad for Tellus S2MX and VX as it is an emerging market. How is this going to change the business proposition for Shell globally in this division?
A: There are various aspects to it. First of all, they are the new generation oils. The oils had to change as many things in the environment, including the OEMs’ and users’ requirement, have changed. Hydraulic systems will be there for the next 20 to 30 years. Most of the current systems are 15-20 years old. They work reliably, and need to be lubricated. What we are focusing on is the total cost of ownership; the likely associated costs such as the cost of lubrication, cost of maintenance and cost of operation.
Q: Is Shell banking on these products for future growth. You seem to have put in a lot of time and effort on them?
A: It’s not the main element but is certainly one of the key elements. We would like to compete with the oil companies operating in this market. The target area is the small users rather than the big ones. We would want them to move to better quality from seals to all other allied components.
Q: Hydraulic oil also depends upon pumps, which is projected to grow by 4.7 percent CAGR to USD10.4 billion by 2022. Do you see the same growth pattern for hydraulic oils; how is Shell positioned to take advantage of this growth?
A: This is not a linear type of correlation; it can either grow faster or slower. If we say we are at 12 percent market share globally, it means that 88 percent is with others. So we have to find out how we can increase our share of the market. We are also looking at the existing market to see how we can position ourselves to offer value that is stronger and better than the competition.
Q: New generation pumps are coming in smaller sizes for similar ratings with reduced power/weight ratio to optimise performance. Do you see a drop in the volumes of hydraulic oils?
A: If you look at the last 30 years, the footprint area versus the capacity has gone down by six times, and has become much smaller. So when you make the overall equipment smaller and more compact, the oil reservoirs also become smaller which means that the demand will come down. The market will shrink but this is not something that is happening only now, it has been happening for quite some time. On one hand you have a market with CAGR, and on the other hand you have people who are becoming more discerning in the selection of lubricants. Awareness has certainly increased. In the mining industry oil leakage was a big problem as also deterioration of oil with consequent increased wear and tear of machines. We showed a customer in India that using Shell synthetic oils would help reduce leakage, the seals would not fail, the drain interval would go up and the life of the equipment would increase. All of these justified going in for synthetics where the cost benefit would be positive.
Q: Growth seems to be much faster in APAC than the rest of the world. How prepared are you to take on these emerging demands?
A: Things are getting smaller; old equipment and high consumption is replaced by new norms. Customers have seen the reality – the effect of temperature, pressure and stress on oils. Oils that worked earlier cannot be used anymore – that’s where we have an opportunity.
Q: India needs special products due to local conditions like temperature, soot formation, overloading of vehicles and low speed. Do you have a specific initiative from India for development?
A: The current hydraulic system drives everybody harder – high loads and low speeds, temperature changes (anything above 36 degree C is considered hot and below that as cold). For hydraulics everybody goes up to 60 degree C so the ambient temperature doesn’t make much of a difference. That is why we have introduced VX which is very versatile when it comes to temperatures (25 – 45 degree C variation in operating temperature); efficiency is correlated with this temperature window.
Normally, people do not see that linkage. If the oil becomes thinner there is a drop in volumetric efficiency and internal leakage will happen. If the oil becomes thicker at low temperatures you lose mechanical efficiency as you have to overcome higher friction. So you lose on both sides and system efficiency (a combination of volumetric efficiency and mechanical efficiency) drops significantly. Therefore, there is a case for using a variable temperature hydraulic fluid which is multi-grade oil that helps you save efficiency on both sides.
Q: Among the applications such as earth moving, material handling and hydraulic machinery -where do you see the business coming from?
A: About 70 percent comes from stationary, which is hydraulic oil consumed within a factory, under a single roof. About 30 percent comes from mobile applications; if the resource industry picks up it could go up to 35 percent. There are more plants in the world than mobile equipment, which has smaller sump sizes. For example, in stationary pumps it could be 5,000 litres while in excavators it would vary from 30 to 500 litres. Steel plants have 40 kilo litre and above sumps so just one fill means good business.
Q: Lubricant suppliers are under tremendous pressure to come up with increasingly advanced engine oil specifications. What has been Shell’s experience here? How are you managing the emerging demand as engines are becoming thinner for higher capacities by using multi-grade materials?
A: The engine oil is driven by three things – legislation, legislation and legislation! There is no choice – either you comply with or you are off the business. BS-6 is very important as there are challenges to reduce knocks and particulate matter. For this you have after-treatment hardware like EGR, SCR etc. In EGR you are bringing exhaust gas back into the engine to cool it. When you cool the engine you produce less knocks. But the trade-off is that this brings in more particulate matter into the engine. So, oils have to handle much more soot today than they did earlier. That will determine the life of the engine.
Then there is DPF (diesel particulate filter) that combusts any unburnt fuel before it goes out of the tail pipe. The technology now is to post-inject the fuel, trigger secondary combustion to get a flash which will burn all the unburnt hydrocarbons. This is called soot regeneration. We are taking care of that.
Q: What about the ash in the lubricant that blocks the DPF?
A: The role of the lubricant is to have less ash so as to extend the life of the DPF. The fuel economy is driven by the carbon footprint. If you emit more CO2 you will be penalised. The only way you can reduce CO2 is by burning less fuel – there is no other technology for this. What people do is to reduce the viscosity and make the oil thinner, which will reduce friction. But OEMs don’t want to buy if the viscosity is reduced; they want a certain minimum HTHS (high temperature, high shear) viscosity. That’s where Shell comes in – we have the propositions to drive the emissions and CO2 down.
Q: But there is still a debate going around the world whether emissions have to be looked at only from the engine side or the vehicle as a whole. Also, mineral oils are dominating due to the cost factor. How do you view the future?
A: I would say the biggest challenge is to convince people to pay more now so as to save more later. It’s quite difficult, as price always matters. It will take time. It’s a process of transition as customers are more discerning now and people do talk about the total cost of ownership. Ten years ago nobody was thinking on these lines.
Q: Is there a possibility to standardise lubricants, for example, one lubricant for different kinds of engine application?
A: It depends on the OEMs’ requirements. We can have a one oil format for a diesel or petrol car, to save inventory. We are working with OEMs on this, even in India we are looking at it. Ultimately we have to co-engineer and develop a solution that the OEMs want.
Q: But are not the thermal characteristics of a gasoline engine much less than that of a diesel engine of the same capacity?
A: The European Automobile Manufacturers’ Association (ACEA) had separate specifications for gasoline and diesel engine. They then realised that it is better to have one common specification. Sulphur in the fuel is going down; diesel is no longer considered a dirty fuel. Also, the hardware has increased so much from manual injection to multi-point fuel injection (electronically controlled), that the combustion has become cleaner without much knocking and high temperatures. The ECU takes care of all this. Today, when you sit in a diesel car you don’t realise it is a diesel car – technology has developed a lot. So you can look at one oil that can be used for both types of engine.
Q: Is it available with Shell globally?
A: Yes, we do have a portfolio that can be offered to both but it is not a one-size-fit-all approach. Large markets still have separate oils for petrol and diesel so we follow that. Also, the emission legislation that is coming now is driving the specifications apart because hardware requirements are different for gasoline and diesel engines. So lubricants will still be different. It’s an interesting debate on how you converge and again diverge.
Q: Where do you get the maximum business in lubricants for Shell – from transportation or industry?
A: Transportation is the first, followed by hydraulics.
Q: Economic activities coupled with the drop in crude oil prices have resulted in an imbalance in different markets. How is Shell offsetting this imbalance?
A: It is a given fact that you can’t change the behaviour of people. In the European markets fuel consumption is going down five percent YOY because people have fewer cars as parking in cities has become very expensive. The young generation don’t want to own cars anymore. So we have to take whatever the market gives and react to it accordingly. The other trend we see in the US is that drain intervals have increased. That is something we cannot change as suppliers; we have to live with it and try to predict the changes as far as we can. The underlying economics is that the car population of Asia is growing – that’s the key driver for lubricant demand. Of course, cars have become smaller; many of them now come with three-piston engines and double-clutch transmission. From six to seven litres of oil in the transmission it is down to 1.8 litres or so.
Q: Shell has certain products specifically for the aftermarket that are performance-oriented. Do these products get OEMs’ attention?
A: BS-6 is coming by 2020 which means that even for the initial fill you have to use the same lubricant. The aftermarket lubricant and the initial fill lubricant will be the same; that is another possibility for us. Also, there is something called ‘smart mobility’ which is a public transport network in developed countries that is very low in India and the developing world where people prefer using their own cars, since ownership of a car is a prestige issue. Shell has launched to provide smart mobility for ultra-efficient cars that burn dramatically less fuel and, hence, contribute to the environment. This may lead to less consumption of lubricants as cars become smaller but in the larger interest Shell is talking about the social connect – how do we help society, how can we reduce the carbon footprint to decarbonise the world, how can we help the environment by using a new technology called carbon capture and storage (CO2 is captured and buried five to six km underground) – how can we help the world have more sustainable cleaner energy.
Q: Will longer drain intervals impact the blending activities of Shell?
A: As I said before there are two sides of the coin – one is growth in markets of the developing world and the second is the new technologies that bring in longer drains that may act as a dampener; but overall there is growth. We think growth will offset the reduced demand in specific consumption. By 2050 the world population will cross nine billion, so there will be a huge demand for energy that will have to be met.