BP and Caltex will sever a joint venture that supplies nearly half of Australias lubricant demand.

The businesses are 50-50 shareholders in the Australasian Lubricant Manufacturing Co., the countrys the largest manufacturer of lubricants.

But both confirmed this month that they will not renew their partnership when the current agreement expires in April 2015.

The split will mark the end of all commercial arrangements between the two parties in the Australian lubricant market, with each shareholder to manage its own supply chains. Both companies will also resume direct responsibility for operation of their respective plants, located across Australia.

ALMC manufactures lubricating oil and grease that is sold within Australia or exported. Caltex, a subsidiary of United States-based Chevron, sells its lubricants under the Havoline and Delo brands, while United Kingdom-based BP uses the BP and Castrol brands.

ALMC operates blending plants in Lytton, Queensland; Spotswood, Victoria; and North Fremantle, Western Australia. Its website states that the joint venture has experienced rapid growth that allowed funding of major plant upgrades. The facilities manufacture a range of products, including engine oils, transmission fluids, gear oils, hydraulic oils, oil-based process and cutting fluids, agricultural spray and grease. The vast majority of ALMC products are for the Australian market, though some are toll-blended for other marketers.

Caltex spokesman Sam Collyer told Lube Report Asia that Caltex and BP achieved considerable mutual success from the joint venture but that changes in Australias lube market and increasing competition led both shareholders to look for alternative supply structures.

The decision to allow the ALMC joint venture agreement to expire is based on factors specific to the lubricants market and is unrelated to any other commercial agreements (with BP), Collyer said. Neither he nor BP would identify the factors, but Australias last virgin base oil plants closed during the past two decades, and some of the countrys lubricant manufacturing operations were moved overseas.

Caltex Australia is locally listed and managed, Collyer added. We remain committed to continuing as a major supplier of lubricants in this country. Were not going anywhere and aim to increase our supply of lubricants across the country.

BP spokesman Jamie Jardine said, The decision to end the joint venture provides BP with the opportunity to develop an agile supply chain capable of better supporting our customers needs into the future. From a BP perspective, there should be no shortage of product, and we dont believe that there will be a need for significant imports from overseas markets.

Local pundits will be watching closely to see if one brand can pull ahead of the other once their agreement expires.