Natural gas is on a fast track to overtake

coal as the world’s second-largest fuel,

after oil, and nowhere is this truer than

in Latin America. Against a backcloth of

new gas field discoveries and a lack of

viable energy alternatives, the region is

purposefully turning to natural gas for its

electrical power generation needs.

According to ExxonMobil’s updated fore-

cast, “Outlook for Energy: A View to

2040,” Latin America will more than dou-

ble its natural gas output by 2040, with

much of this new supply being uncon-

ventional types like shale gas, tight oil

and tight gas.

As readers will quickly grasp, this scene

presents challenges and opportunities for

marketers of natural gas engine oils.

Following its study last year into the mar-

ket for natural gas engines and lubricants

in Europe, London-based consultancy

The Strategy Works has extended its

research into Latin America. Some 30

interviews were conducted across six

countries in the region, with a mix of orig-

inal equipment and engine manufactur-

ers, operation and maintenance compa-

nies, and gas engine lubricant suppliers.

How large is this market? In Brazil

alone, The Strategy Works gauges the

powergen outputs to be around 1,000

megaWatt, based on aggregated data

from natural gas engine manufacturers.

This equates broadly to a 2 gigaWatt mar-

ket for Latin America in total, excluding

other thermal power sources.

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GasPower toSurge in

LatinAmerica

BY MICHAEL HERSON

In engine hardware terms, the market

is clearly defined between generators

under 4 mW and over 4 mW. The less-

than-4-mW sector is dominated by origi-

nal equipment manufacturers Jenbacher

and Waukesha (General Electric brands),

Caterpillar and Cummins. In the over-4-

mW segment, the key player is Wärtsilä.

Based on a median oil consumption

figure of 0.43 liters per mW hour, and

discounting gas compression pipelines,

The Strategy Works has sized the Latin

America natural gas engine oil market —

for powergen alone — at 5.1 million

liters a year. Four countries account for

85 percent of the Latin American market

for power generation: Brazil, with 51 per-

cent; Argentina (19 percent); Venezuela

(9 percent); and Colombia (5 percent).

Caterpillar estimates an annual

growth of some 10 percent, and all

those interviewed endorse market

growth. As Luiz Carvalho, manager of

energy business development at

Wärtsilä in Brazil, explains, “In Brazil,

Wärtsilä develops its own projects and

it’s currently working on two opportu-

nities with a total of 570 mW for natural

gas. There is a great demand for energy

from natural gas and the growth per-

spective is very interesting.”

OEM ChallengesIn Europe it is well established that alterna-

tive gases such as landfill, biogas, etc., pro-

vide more challenging conditions for

engines and their oils, but in Latin America

it is also natural gas that can cause engine

problems. Much of this is connected to the

gas source, and these problems can be

regional in nature, as noted by Estenban

Flórez, technical specialist at Genser Power

in Colombia. “In the east part of the coun-

try the quality of this gas is really bad,” he

reveals. “It has low levels of methane and

high levels of propane.”

Another cause of problems is the gas’s

low calorific value, as confirmed by

Wagner Silva, CEO of the Brazilian power

plant operator Breitener Energetica. “The

gas has a low calorific power [which]

means that it has a lower content of

methane, which does not reach the

desired levels established by the OEM.”

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Brazil, explains Marcelo Cupolo,

Caterpillar’s territory sales manager

there. “Biogas, mainly from pig or chick-

en manure, is contaminated with sulfur

(H2S) and the gas needs to be treated

using a carbon activated filter or other

new technologies, to evaluate the pro-

ject,” Cupolo said. “For landfill gases the

problem are the siloxanes, but we have a

proven solution that allows customers to

create efficient and reliable power.”

Maintaining PowerMany power plant owners rely on con-

tractors to oversee all aspects of their

equipment’s operations and maintenance

including its lubrication. These O&M con-

tractors typically work under variable

Alexandre Lacerda, general technical

manager at Stemac, which markets gen-

erator sets in Brazil, concurs: “The main

problem is related to the calorific value

and resistance to detonation, which can

lead to a lower capacity in terms of kW.”

Engines maintenance manager Mariano

Domínguez of Sullair Argentina, which

markets and services Cummins Power

Generation products, reports similar

issues, saying, “The most common prob-

lems are related with the nature of the

gas. Since the gas that we use is well gas,

it doesn’t have much treatment so it can

harm the equipment more easily.”

When it comes to alternative gases, the

two biggest headaches are sulfur contam-

ination and siloxanes, particularly in

charging systems based on per-kW hour,

on fixed payments, or on hours of main-

tenance performed.

Emerson Cabral, who is manager of

energy unit product support at Sotreq in

Brazil, explains they operate under differ-

ent models for landfill projects versus

cogeneration. “For landfill gas we charge

per energy produced, or for the price of

the fixed structure. For the cogeneration

projects there are also two models: a

fixed price for the mobile team that gives

referenced support, or the other based

on the amount of maintenance done.”

Wärtsilä’s service model in Brazil is

based on guarantees of performance dur-

ing the life cycle of the plant, Luiz

Carvalho explains. “Wärtsilä operation

and maintenance agreements guarantee

the performance of customers’ power

plants, including fuel and lube oil con-

sumption, and all other consumables

needed to keep the equipment running

and available during the its life cycle.”

Contract length varies by supplier from

five to up to 20 years, with the average

term being 15 years. Contractors also say

that remote monitoring is commonplace,

with 79 percent of those surveyed adopt-

ing that as their preferred method to

monitor performance of engines. In

Colombia, Pegsa is one of these advo-

cates. “The aim is to predict possible fail-

ures in the equipment and so, in those

cases, we use tools like videoscope

inspections, analysis of oils, analysis of

vibrations and ultrasounds,” says Daniel

Martinez, Pegsa’s service department

manager.

Which Oil to Use?When it comes to selecting a brand of

natural gas engine oil to use, the most

powerful influence is the OEM.

Domínguez at Sullair Argentina succinctly

captures the views of many in saying,

“The oils that we decide to test are oils

that have been previously approved by

the OEM.”

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Luiz Carvalho Alvaro Longo Bernardo Vianna

Sullair Argentina supplied these Cummins gas burning units to power companyPluspetrol in Neuquen, Argentina.

Although many brands are listed on

most equipment manufacturers’ web-

sites, The Strategy Works’ research shows

that three companies dominate this seg-

ment in the Latin America region:

ExxonMobil, Chevron and Petrobras.

Indeed, 64 percent of those interviewed

believe that OEMs are not really incen-

tivized to develop new suppliers. They

say it is very much the role of the gas

engine oil supplier to be proactive in

marketing to its customers.

The research confirms that oil sampling

and testing is widespread in the market

and 42 percent of end users rely on their

gas engine oil supplier for this service;

the remainder either do their own testing

or contract it to an independent lab. The

purpose of the testing is to calculate oil

change intervals and monitor engine

components for potential wear.

Most Caterpillar dealers have their own

lab, confirms Cupolo. “Oil sample analysis

is important to understand the state and

level of wearing on main engine internal

parts.” And Silva at Breitener sees it as a

way of reducing maintenance costs. “Lube

oil is an important variable and oil sample

testing is mandatory to reduce mainte-

nance and operation costs.”

The Additive EffectThe performance benefits derived from

lubricant additives are widely recognized

by customers in Latin America’s power-

gen market. They see the most important

attributes as protecting the gas engines

against corrosive substances that form in

the oil such as acids, and reducing wear

and tear by improving the oil. In Brazil

they regard additives as essential to pre-

vent damage from siloxanes.

As was established in The Strategy

Works’ earlier European study, there is

no independent marketing of natural gas

engine oil additives to end customers;

they are always incorporated within the

gas engine oil.

Bernardo Vianna, a product technical

support specialist with Chevron Brazil

who focuses on product life-cycle man-

agement, believes that additive packages

play a particular role in landfill gas

engine oil formulations. “The types of

gases formed at landfill sites are much

more severe and corrosive than natural

gas,” he reports. “These aggressive acids

need to be neutralized by robust addi-

tive packages to avoid premature engine

damage and/or [a need for] reduced

drain intervals.”

This view is endorsed by Alejandra

Alcaide, technical assistant at the Spanish

lubricant supplier Repsol: “The acids pro-

duced by the combustion of gases, such

as [sulfuric acid], are neutralized by the

correct use of an additive pack.”

Lubricant supplier YPF in Argentina

also believes that lubricant additives have

a key role to play. “To avoid corrosion,

the additive must have the ability to neu-

tralize acids formed from sulfur content

in the gas,” comments Jose Luis Duran,

director of YPF’s technical department.

Reaching the MarketNatural gas engine oil suppliers tend to

use their own sales teams, which in turn

are part of their main lubricant business;

little evidence is seen of separate sales

teams for this specific end use. In this

respect, the Petrobras model is the one

most employed by suppliers, according

to Paulo Esteves, the Brazilian major’s

director of technology and industrial

lubricants development. “The marketing

of lubricants is made by the regional

sales managers. As to distribution and

logistics, we operate throughout the

national territory with our own structure

through direct sales from the factory in

Rio de Janeiro. We don’t have an exclu-

sive sales team for the gas engines oil, as

these oils represent a small commercial

amount in terms of volume.”

When it comes to marketing its prod-

uct lines, Repsol differentiates its gas

engine oils between low-ash and high-

ash formulations, depending on whether

the applications are for natural gas or for

unconventional fuels.

Additive manufacturer Chevron Oronite

also differentiates its products according

to the type of fuel. “We supply additives

designed for all different quality levels of

gas that engines use in this market,

including engines operating in landfill,

biomass, and digester gas operations. In

these applications, the gas quality varies

greatly and is typically low-methane, high-

moisture, and corrosive,” explains

Stephen Best, Oronite’s Americas Region

NGEO product line manager.

Close RelationsGiven that nearly all gas engines are

imported into Latin America, oil mar-

keters naturally need to have internation-

al commercial relationships with OEMs,

according to Alvaro Longo, technical sup-

port coordinator and director of lubri-

cants marketing at Petrobas. “It’s a very

important relationship with the OEMs,

because they have great influence and

they participate in the decisions of the

selection of lubricants.”

Some relationships are “tied” such as

the longstanding one between Sullair

Argentina and Cummins Power

Generation. “We are the representative of

Cummins exclusively. Therefore, our rela-

tionship is quite fluid and easy to man-

age,” remarks Mariano Domínguez.

Chevron, which has an international

NGEO product line named HDAX and

recognizes that global approvals are

mandatory in this market, has developed

relationships with all the major gas

engines manufacturers. Indeed some of

the HDAX products are already being

manufactured at Chevron plants in Brazil

and Colombia, confirms Vianna.

Generally however, equipment manu-

facturers are reluctant to recommend a

single brand, usually leaving it to the

end customer to choose from a speci-

fied list. [Continued in Part 2]

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In Central and South America, the linesbetween initial sales of power genera-tion equipment and subsequent main-tenance services can be somewhatblurred. Many OEM distributors in theregion engage in both tasks, with littlenatural division between their role andthat of operation and maintenanceproviders, as you see in Europe. Wheredoes this leave suppliers of natural gasengine oils?It leaves them with plenty of opportu-

nities — to knit close and lasting rela-tionships, to differentiate their brands

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LATINAMERICA: Ripe for Gas Engine Oils

and products in the environmental,supply and performance areas, andultimately to win market share. That’swhat The Strategy Works learned instudying Latin America’s demand fornatural gas engines and lubricants.Building upon last year’s research

into Europe’s market, the London-based consultancy conducted extensiveinterviews with more than 30 originalequipment and engine manufacturers,operation and maintenance companiesand gas engine lubricant suppliersaround Latin America.

BY MICHAEL HERSON

I

COPYRIGHT 2014, LUBES’N’GREASES MAGAZINE. REPRODUCED WITH PERMISSION FROM THE NOVEMBER AND DECEMBER 2014 ISSUES 6

Researchers heard that end users are

eagerly tapping the region’s supplies ofgas for their electricity needs, withmany selecting natural gas-fueled, reci-procating engines in the 100 kilowattto 20 megawatt range. Unlike nationalpower grids, this electricity is used ator near the point of generation. Theunits can be installed quickly — some-times in mere weeks — to supplymines and steel mills, cement, chemi-cal and fertilizer plants, oilfields andrefineries, plus hospitals, airports, datacenters and other critical operations.

“The increased availability of naturalgas and/or other type of gases is open-ing opportunities in South America,”points out Antonio Nava,general manager of powersolutions, South America,at Cummins PowerGeneration. “Gas-to-ener-gy projects below 20 mWare more reliable and effi-cient compared with theelectricity offered by thecommercial grid.” Amongother projects, Cummins

last year installed five 2 mW gas-fueledgenerator sets at the busy Port ofPecem in Brazil’s state of Ceara; twomore assure standby power for a newcommuter rail system in Salvador, inBahia state.Exterran, a Houston-based natural

gas project engineering and designcompany with more than a dozen loca-tions in South America, puts highexpectations on its gas engine oil sup-plier. “It’s mandatory to have a gasengine oil part-ner to clarifydoubts, offertraining, oilsample analysis,make visits tothe operationand discussproblems relat-ed to lube oilapplication,”reveals KamalAbi Farag, thecompany’s maintenance manager inBrazil.However, when it comes to the

engine oil for such equipment, equip-ment manufacturers generally arereluctant to recommend a single

brand, usually leaving it to theend customer to choose froma specified list. Many mainte-nance contractors regard OEMgas engine oil specifications asmandatory, confirms EmersonCabral at Brazilian serviceprovider Sotreq, which isallied with Caterpillar.“Caterpillar sends us adatasheet with the specifica-

An Ecogen technician working on site in Brazil. (Photo: Ecogen Brasil)

SECOND OF TWO PARTS

Kamal Abi Farag

Antonio Nava

tions of additives and of the oil compo-sition we must use,” points out thisproduct support manager. “This com-position is based upon Caterpillar oil.”Similarly, Carlos Silame, project super-

visor at Cummins Brazil, highlights hiscompany’s special relationship withValvoline. “It is mandatory because with-out approval, in case of a catastrophicfailure, equipment will not be coveredby warranty. Valvoline is always the firstoption — and all treatments are madedirectly by Cummins.”All those interviewed are optimistic

about the future, and interestingly theysee even more potential for natural gasthan for alternatives such as landfill orbiomass gas. (In that respect the LatinAmerican market differs from Europe.)The underlying reason for this is newgas field discoveries and infrastructureimprovements, with optimism highestin countries with large natural gasresources such as Argentina.“Argentina has great potential due to

its unexplored reserves [but develop-ments] mainly depend on political rea-sons,” comments Marcelo E. Martins,

technical support and product linemanager, at Axion Energy in BuenosAires, ExxonMobil Lubricants’ distribu-tor in Argentina.There are also developments in

Peru, where the government hasrecently invited tenders to extract nat-ural gas from one of the country’slargest gas reservoirs, which will havea positive impact on the gas enginesindustry.Wärtsilä Brazil’s manager of energy

business development, Luiz Carvalho,also stresses the importance of new dis-coveries: “What we see here in Brazil isthat sales of the gas engines for naturalgas have big potential over the comingyears, due to new discoveries of naturalgas reserves, both offshore andonshore.”Although not as prominent as they

are in Europe, environmental factors —starting with greenhouse gas emissions— are becoming a consideration inLatin America.“It is evident that this market is grow-

ing really fast and in Latin America wethink that we are going to see a boom

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Which Gas Will Expand Fastest?Latin American users favor natural gas, landfill methane

Type of Gas % of Your Fleet, MWFuture Importance (1=lowest; 5=best)

Natural Gas 82.5 4.8

Other 6.6 2.6Landfill Gas 4.6 3.6

Other Biogas 4.6 3.0Coal Mine & Coal Bed Methane 0.7 1.0Anaerobic Digestion Gas 0.2 2.9

Source: The Strategy Works

Wärtsilä converted these heavy-fuel-burning engines to run onnatural gas in Manaus, Brazil.(Photo: Wärtsilä)

in the production and use of gas toproduce energy due to its environmen-tal impact and its cost,” says IbanBascones, sales manager of marinelubricants and cogeneration at Repsolin Spain.The risk of shortages and even

rationing, which has been a factor inthe past, also has brought environ-mental issues back to the table. NelsonOliveira, CEO of Ecogen Brasil in SaoPaulo, foresees growth in landfill gasapplications resulting from these pres-sures. “The need to be environmental-ly correct, allied to energy shortage,will make landfill an option to solveboth problems,” Oliveira believes.Ecogen has 48 branches around thecountry and has installed, operatesand maintains scores of natural gaspower generation sets.General Technical Manager Alexandre

Lacerda of Stemac, which also marketsgenerator sets in Brazil, agrees, butbelieves there should be more incen-tives for this alternative gas option.“There are great expectations on land-fill but without receiving the properincentives the feasibility would be com-promised.”Landfill gas may become more promi-

nent in Brazil in the future than in therest of Latin America, observes LuizSilvio Conti, lubricant specialist atChevron Brazil: “Due to the increaseddemand for greater production of ener-gy, the use of landfill gas is developing.In all cities that have a sanitary landfill,there is a plan to develop the energyproduction using landfill gas.”The other issue promoting growth is

the lack of viable alternatives for reli-able power generation. For example,hydroelectric power contributes morethan 80 percent of Brazil’s electricity,but delivery falters in dry monthswhen water reservoir levels are down.And hydro is not the only powersource that cannot keep up, accordingto Wagner Silva, CEO of Brazilian plantoperator Breitener Energetica.“Talking about energy as a whole,”

Silva notes, “hydropower generation isnot enough to meet the full demand;nuclear energy is scrapped; alternative

energies like wind and solar, in spite ofbeing trendy, do not have enough vol-ume. So thermo electric power genera-tion is a very important option to com-plement the energy matrix.”To meet future demand, Stemac’s

Lacerda expects operators will demandgreater performance from gas engines.“Our customers will require in thefuture gas engines that can reach thesame performance as a diesel engine interms of power [kW],” he says.Martins of Axion Energy also looks

forward to engines with higher out-puts, and to advances in lube oil tech-nology. “Customers are requiringengines with higher output and lowerfuel and lube oil consumption. Todeal with this, engines will operatewith higher temperatures. And thefuture challenge for gas engine oilcompanies will be to develop lube oilsthat endure these high temperatureswithout degrading, creating depositsor generating corrosion.”Looking ahead, powergen output

from reciprocating gas engines mayonly represent 8 percent of totalthermal output in Brazil right now,but that percentage is steadilyincreasing from a small base. Marketconditions are clearly favorable andboth OEMs and lubricant manufactur-ers can view the Latin American mar-ket with optimism. �

Michael Herson is an analyst with theLondon-based consultancy TheStrategy Works, which specializes inoriginal research on the lubricantssector and other business-to-businessmarkets on a global basis. Reach himby phone at +44 208 868 0212, or e-mail mherson@thestrategyworks.com.Website: www.thestrategyworks.com

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