The Challenges of Bringing Innovation to PCMO
Petroleum Trends International, Inc. – Publishers of JobbersWorld
September 23, 2024
Bringing innovative lubricants to market is a complex process with many inherent and often unexpected challenges. The challenges can be even greater when introducing innovative products in the PCMO market where demand is declining, pricing is highly competitive, and margins are slim. But, while the path to innovation in PCMO is arduous and often fails, its pursuit can provide measurable and meaningful advantages to differentiate products and increase sales.
This article examines some of the challenges faced by companies attempting to introduce innovative Passenger Car Motor Oils (PCMO) to the market, using Evolve Lubricants and Novvi as a case study.
The distinguishing feature of these PCMOs is their formulation with base stocks derived from plants, as opposed to those obtained from crude oil. Consequently, the narrative commences with Novvi.
Novvi
Novvi’s roots date back to 2010, when Cosan S.A. Industria e Comércio and Amyris, Inc. agreed to undertake business, technical, and commercial studies and tests to evaluate the viability of establishing a Joint Venture to commercialize renewable base stocks made from Biofene®. Amyris’ Biofene is a sustainable and versatile product produced by fermentation of plant sugars. Biofene is a precursor molecule that can be converted to other natural ingredients, including base stocks.
Following the successful results of this initiative, Cosan and Amyris formalized a Joint Venture agreement in 2011, marking the final step in initiating the formation and operation of Novvi. Amyris and Cosan U.S. each owned 50% of Novvi. The JV aimed to facilitate Novvi’s global development, production, and commercialization of renewable base stocks derived from Biofene®. The integration of Amyri’s Biofene infrastructure and technological framework with Cosan’s feedstock capabilities and supply and distribution network established the groundwork for Novvi to emerge as a frontrunner in high-performance renewable synthetic base stocks.
In 2016, American Refining Group, Inc. (ARG) and Chevron U.S.A. made capital contributions to Novvi, and in 2017, H&R Group US also invested in Novvi. This was followed by Amryis divesting interest in Novvi in December 2017 when Amyris sold its first purpose-built, large-scale production plant in Brotas, Brazil, to DSM and concurrently entered into a supply agreement with DSM to purchase output from the facility.
In addition to navigating the complexities of proof of concept, establishing the Novvi business, securing investors, formulating business, sales, and marketing plans, adjusting to a change in ownership, and a supervised debt restructuring, Novvi was also tasked with showcasing the performance of its base stock across various engine oils and industrial lubricants. Many challenges had to be overcome before even a drop of this innovative base stock was sold.
Novvi’s initially launched Group III base stocks sourced from sugar. Early research on these products proved their effectiveness across various engine oils and industrial lubricants. In collaboration with additive companies, Novvi completed all performance-based industry engine tests, which showed favorable API SN/GF-5 program results. In addition, Novvi says the base stock performed well during both engine and industrial field testing.
While Novvi’s first-generation base stock was derived from sugar, its second-generation product could be made from any plant oil (i.e., coconut mustard, palm, and others). These new base stocks significantly outperformed the sugar-based products and proved to have the lowest viscosity-to-volatility relationship of any base stock currently in the market. With this success, Novvi received funding to build a 25,000MT plant and completed construction in 2020. The new product was branded as “SynNova” and volumes were sufficient to increase sales. Throughout this period, Novvi partnered with prominent additive manufacturers to primarily develop the new SynNova base stock for automotive drivelines and passenger car engine oils. In consultation with base stock experts and additive companies, Novvi declared that its base stock met the requirements of an API Group III in 2018.
Since launching its first commercial production in 2014, Novvi has steadily increased base stock production. Although the road to get there was long and fraught with trials and tribulations, Novvi soldiered on to reach a point where blenders now have an opportunity to use SynNova and differentiate their lubricants as sustainable, high-quality alternatives to traditional petroleum-based base stock products. Evolve Lubricants is a notable example of such a blender, leading us to the subsequent part of the narrative: the difficulties associated with introducing an innovative PCMO to the marketplace.
Evolve Lubricants
Evolve Lubricants Inc., a green technology company founded in 2021 and headquartered in Reno, Nevada, develops groundbreaking high-performance non-petroleum lubricant solutions.
Evolve produces engine oils formulated to offer superior performance and environmental benefits compared to traditional petroleum-based lubricants. The company’s product utilizes NOVVI’s plant-derived bast stock to create high-performance, sustainable motor oils with improved shear stability, oxidation resistance, and heat protection. Evolve says these products enable customers to reduce their environmental footprint without compromising engine performance.
Mr. Rick Lee, CEO of Evolve, says Evolve worked with Novvi and a major additive company to approve an oil for the PCMO market. “We received a Candidate Data Package from the additive supplier, who certified a Base stock interchange program for the SynNova base stock.” Lee added that in December of 2023, data from this package was used to apply for three licensed PCMO products (SAE 0W-20, 5W-20, and 5W-30). The data was accepted into the API system, and the license fee was paid. Separate from the approval work, Evolve has conducted engine and field tests to support their product further.
While it typically takes very little time to be listed on the API approval list after the data is submitted and fees are paid, Lee says several months went by without receiving feedback from API. In late March 2024, Lee said that he heard that the API was raising concerns regarding the program; however, there had yet to be any direct communication with Evolve or Novvi regarding the specific issues and their resolution timeline.
In June 2024, Lee said that the API informed them that the SynNova base stock was an API Group IV, not a Group III as designated by Novvi. As such, the data provided to API was insufficient to grant their license. At the same time, Novvi says it was hearing from its other customers that their API licenses were revoked without notice or discussion for the same reason. So, although Novvi had successfully navigated the various obstacles associated with launching an innovative non-conventional base stock, and licensed PCMO’s blended with this base stock had obtained API approvals and were available for sale, the API effectively reset the process by now classifying the base stocks as Group IV.
Consequently, those blending a PCMO with Novvi base stock must now adhere to the guidelines governing an API Group IV – Polyalphaolefin (PAO) program instead of using Group III group guidelines. This adds a new and significant cost burden/barrier to obtaining an API license.
As a point of reference, a Group IV program is estimated to cost between $300,000 and $500,000, in contrast to the $100,000 investment for a Group III base oil interchange program. Marketers and additive manufacturers may be less inclined to undertake significant investments as the justification for such business decisions becomes increasingly challenging.
At this time, Evolve reports that the API has not directly offered a rationale for its decision, nor has it engaged in discussions with them. Jason Wells, the Chief Technical Officer of Novvi, stated, “During a brief discussion with API, the organization indicated that its decision was based on product stewardship information related to the European Union’s Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH), which they believe aligns more closely with PAO. Novvi has been seeking a follow-up meeting for several months to discuss the reasoning behind categorizing SynNova as Group IV and has requested a follow-up meeting to go through Novvi’s rationale for categorizing SynNova as Group III. Wells said he was surprised that API acted without prior consultation with either Novvi or its customers.”
Novvi states that it sought the advice of some of the world’s leading base stock specialists concerning its classification decision and that the product aligns with the criteria for a Group III base stock. Additionally, its production method and the licensed process technology are typical of a Group III base stock.
Currently, the reclassification of the SynNova base stock has put at risk the business strategies of Evolve, Novvi, and potentially other companies aiming to develop high-performance, sustainable products for engine oils while also affecting research and development initiatives for future advancements. Industry sources tell JobbersWorld that this action is unprecedented and does not align with the operational practices API has historically followed regarding the EOLCS. So, the underlying question remains: why is API now declaring Novvi base stock to be a Group IV?
The experiences of Novvi and Evolve Lubricants demonstrate that the transition from groundbreaking PCMO concepts to successful market implementation is complex and filled with obstacles. Although many of these challenges can be anticipated, others may arise unexpectedly.
The journey begins with a concept aimed at improving and differentiating PCMO to meet existing or evolving market needs. Transforming these ideas into market-ready solutions, however, requires significant time, dedication, human resources, and funding. Developing new PCMOs involves several critical steps, including concept formulation, market analysis, extensive and costly product development and testing, collaboration with additive suppliers and others, obtaining licenses, certifications, and approvals, crafting business and marketing strategies, conducting field tests, and ultimately launching and marketing the product. But, as demonstrated by Novvi and Evolve, even after a product has been successfully introduced to the market, it can still face significant setbacks due to unexpected occurrences. The unforeseen event in this case study is the API’s classification of SynNova as a Group IV base stock.
JobbersWorld is, however, optimistic that this issue will be resolved, paving the way for industry advancement and encouraging innovative solutions to create high-performance lubricants from renewable resources. Further, as stated in my May 2019 article in Lubes-n-Greases titled “Grappling with the Groups,” “Back in 1993, when the API first introduced base stock groups, it provided a useful way to sort base stock types by performance characteristics. In addition, it afforded an opportunity for automotive engine oil blenders to make marketing claims by using certain base stock types in their finished products. But as helpful as it was all those years ago, times have changed, and questions are mounting about the utility of the API Groups and whether change is needed.”
The API needs to state publicly and by what method they used to determine Synova was a group IV. So far, apparently the API only have some garbage from the European Union’s Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) group, and haven’t actually analyzed it themselves.
If I were Novii, I would send samples of the Synova base stocks to leading Physical Chemists in North and South America and Belgium and have them use not only FFTIR, but NMR Carbon and NMR hydrogen analysis in order to settle this issue.
An institue acting making a decision without sufficient rationale or communication is not acceptable. This shows how far behind the curve API is. 31 years without updates to the standards and they use them to prohibit the use of a renewable, high-performance product?
The real question is what does API stand to gain from it’s sudden shift to reclassify the base stock as a Group IV? By doing so, it strains businesses by making them justify the expense which in turn, could hurt them financially. Is it being done to try and protect the big players in the market that aren’t manufacturing renewable, eco base stocks? While this is all speculation, I wouldn’t be surprised if there was a kickback on API’s end if they made it harder to obtain licenses for this product. At the same time however, maybe not. The PCMO market is extremely cut throat. It’s hard to distinguish a difference in oil quality between the major manufacturers, and because there are so many, margins are extremely small for direct distributors who sell it.