Spotlight on Bangladesh


SEOUL – China and India may grab the headlines, but numerous smaller Asian countries report vibrant growth and fast-changing lubricant markets. In Bangladesh, lube demand and quality are rising, and one local blender is taking the lead.

Azam J. Chowdhury, an industrialist and entrepreneur whose business interests in Bangladesh include trading, manufacturing, engineering, banking, insurance, tea plantations, fuels and lubricants, offered a rare glimpse of his countrys lubricant market at the ICIS Asian Base Oils & Lubricants Conference here on June 8.

Chairman of East Coast Group in Dhaka, Chowdhury is also managing director of Mobil Jamuna Lubricants, a joint venture with ExxonMobil Corp., now known as MJL Bangladesh Ltd.

Bangladesh, said Chowdhury, has a population of 156 million and the worlds 48th largest economy. Annual exports are U.S. $16 billion and imports are $22.6 billion – but $8 billion of those imports are remittances from nonresident Bangladeshis. The economy is growing 6 to 7 percent annually, and the main challenge, said Chowdhury, is to ensure energy security for maintaining its current GDP growth.

The countrys economic position is below India but well ahead of Pakistan and Sri Lanka and equivalent to other emerging nations in Asia, such as Philippines, Indonesia and Vietnam, he continued. Natural gas and coal are the main sources of energy. The country has a lone 50-year-old refinery with no base oil plant, and is largely dependent on imports of petroleum products.

After independence in 1972 until 2000, only the state owned oil companies were allowed to import, blend or distribute lubricants in Bangladesh, and during that period 65 percent of all lubricants contained no additives. But in 2001 lubricant marketing was liberalized, distribution of non-additized engine oil was banned, and minimum standards of API SC/CC were established, Chowdhury continued. Since then more than 52 brands of lubricants have entered the Bangladesh market, but apart from Mobil, Shell, BP, Castrol, Fuchs, Total, Conoco, Gulf, SK and Caltex, most of the brands have no real brand value in the market.

Eleven companies currently blend in Bangladesh, but all are very small except MJL Bangladesh Ltd., which blends Mobil and Esso branded products.

The countrys annual lubricant demand has grown steadily from 58,300 tons in 2007 to a projected 62,600 tons (about 18.4 million gallons) in 2010. MJLs Mobil brand has 26 percent of the market, followed by BP (11 percent), Total (6 percent), Shell and Castrol (each with 2 percent), and others, the lower market in Chowdhurys words, with the remaining 53 percent.

About 20,000 tons per year of base oils are imported by the 11 blenders; MJL alone imports about half of the total. Apart from MJL, the blending capacity of the other blenders is small, ranging from 500 to 1,500 tons per year. Importing base stocks in flexibags also makes their business operations expensive, Chowdhury said.

MJL Bangladesh inaugurated its inline lube oil blending plant in 2003, where it blends and markets Mobil lubricants under license. MJL is now exporting Mobil lubes to Nepal and Bhutan, the first entry of Bangladesh in lubricant exports.

Companies producing Mobil, BP and Total brands fully comply with the governments ban on the marketing of non-additive straight mineral oil as engine oil, he continued, and demand for premium and competitive grades of Mobil-brand lubricants continues to increase. Government-owned oil companies continue to lose market share to private blenders and importers.

Government policies and import duties have reduced imports of finished lubricants in Bangladesh. Import duties on base oils and lubricant additives are less than half the level of duties on finished lubes, said Chowdhury, so local blenders will take the opportunity of blending more products locally, for better margins and long term sustainability.

But according to the June 26 Financial Express Bangladesh, government import policies changed suddenly in April, and importing raw materials for lubricants – presumably base oils and additives – is now prohibited. The new policy favors importing finished lubricants, the online paper reported.

Due to the restrictions, raw materials worth billions of taka are currently stuck up at jetties, the president of the Bangladesh Lube Blenders Association is quoted as saying.

Local blenders are urging the government to immediately allow imports of raw materials, and a commerce minister told the Financial Express that the ministry might do so soon.

Looking forward, Chowdhury told the ICIS conference that the government may raise minimum standards for engine oils to API SF/CF levels, banning lower grades.

Chowdhury concluded with pride that his company played the pioneering role in changing the mind set of local consumers for selecting the right lubricants.

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