BP, Caltex Undo Aussie JV


BP and Caltex last week dissolved Australasian Lubricant Manufacturing Co., a 15-year joint venture that makes about 50 percent of the nations lubricants.

The dissolution, which had been in the works for 18 months, took effect Friday. The carve-up sees BP and Caltex splitting control of ALMCs blending and warehousing facilities, with BP securing key assets linking the southern breadth of the country from Melbourne to Perth. Caltex is left with plants at either end of the busy east coast corridor from Melbourne to Brisbane.

The severance of the joint venture comes amid a raft of corporate shifts in the Australian lubricant industry. Last month, Chevron sold its stake in Caltex Australia for $4.7 billion, the largest block sale in Australian corporate history. Investment banks have reportedly made a tour of Asia testing the appetite for petroleum retailer United with South Korean majors S-Oil Corp and SK Innovation cited as potential suitors for the $1.3 billion group.

A Caltex spokesman said the end of ALMC largely returns the partners lubricant businesses to the structures they had before the joint venture. From April, the two shareholders will revert to operating their own facilities, said Sam Collyer. For Caltex, this means taking over the production facilities at Lytton, in Brisbane, Queensland, and Newport, in Melbourne, Victoria. Caltex has also set up a new storage facility in Enfield, an industrial and intermodal site in Sydney, New South Wales.

There will be no change for our customers. Caltex will continue to offer all its current products, Collyer said.

Likewise BP says it remains committed to the Australian market and that it will retain local manufacturing capabilities by keeping plants in Fremantle, south of Perth in Western Australia and Spotswood, in Melbourne in Victoria. In addition, BP has taken control of ALMC’s tank and warehouse storage facility in Guildford in Sydney, New South Wales.

From BPs perspective this manufacturing change is business as usual with no changes to our product portfolio or customer offer, said Sean Rahaley, general manager of BP Lubricants in Australia.

United Kingdom-basedBP markets lubricants under the BP and Castrol brands.

Caltex Australia holds rights through a licensing agreement to sell lubricants using Chevrons brands in Australia, including Havoline, Delo and Ursa. Caltexs Collyer said the removal of Chevron from Caltexs share register doesnt alter existing arrangements between the companies. Key brand agreements between Caltex Australia and Chevron remain in effect.

The ALMC website last week said the group had experienced rapid growth enabling it to invest in technological upgrades to plants. The plants make engine oil, transmission fluids, gear and hydraulic oils, cutting fluids and greases. In addition to manufacturing, ALMC procures and warehouses detergents, degreasers and hand cleaners.

BP and Caltex both cited more nimble supply chains as reasons for exiting the joint venture. The joint-venture was begun because at that time it provided operational benefits to both parties. However, as with any such arrangement, these mutual benefits do not last indefinitely, Collyer said, adding, Caltex decided two years ago not to renew the joint-venture as it believes it can deliver the best outcome for customers managing its own supply chain.

Both companies declined to provide information relating to the financial affairs of ALMC, citing confidentiality agreements.

Meanwhile, on the sidelines of the BP-Caltex separation of ALMC’s assets, rival Australian lubricant makers and distributors say they are not expecting the split to open up any gaps in the market.

BP estimates it holds about 30 percent of the Australian lubricant market, playing leading roles across many market segments, including mining, transport and agriculture. It supplies retail outlets, franchised vehicle dealerships and workshops. Caltex says it ranks second with 21 percent of the market. Both companies have national distribution networks supplying their lubricants products designed to service the equipment chain from power stations to lawnmowers.

For the future, BP says it will continue to operate as it has been, making lubricants for the Australian market both offshore and locally. This will continue with the Western Australia and Victorian manufacturing facilities reverting to BP management. This provides us with a comprehensive supply solution across both the East and West coasts, supplemented by imports from Europe, Asia and the U.S., Rahaley said.

Similarly, Caltex assets are geographically spread spanning the east coast where most Australians live. In addition to the Brisbane and Melbourne manufacturing plants, Caltex has storage and distribution facilities across Australia, said Collyer.

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