A groundbreaking ceremony Thursday in Singapore included officials from Sinopec, the Singapore Economic Development Board and JTC, developer of industrial infrastructure.

Located on a 40,000 square meter site in Tuas in southwestern Singapore, the project will be Chinese government-owned Sinopecs first lubricant plant outside of China, and the initial investment represents its first step towards global expansion in its refining and marketing sector. The Singapore plant will function as Sinopecs Asia Pacific regional hub for production, servicing and logistics, servicing customers in South East Asia, Australia and New Zealand, the company said in a statement.

Construction of the Singapore lubricant plant is part of Sinopecs three-prong strategy for global expansion. The Chinese oil major said it will explore Asian and Pacific markets, construct overseas plants, and establish a global sales and service network.

Going forward, the Singapore plant will serve as the model for our future investments overseas, production, sales and plant operation, said Song Yuchang, general manager of Sinopec Lubricant Co. Singapore will be our gateway to the rest of the world as we embark on extending our global footprint.

According to Sinopec, its decision to build the plant in Singapore was based on Singapores pro-business environment, strategic geographical location within Asia and its open trade policy. The company said Singapores growing position as a leading trading hub for oil and gas would help to facilitate Sinopecs international expansion.

Kline & Co. estimated Sinopecs total lubricant sales at 1.3 million metric tons valued at $1.8 billion in 2009. That included 580,000 tons of industrial oils and fluids (valued at $770 million), 480,000 tons of commercial automotive lubricants ($660 million) and 240,000 tons of consumer automotive lubricants ($350 million).

In 2009, Kline noted that although Sinopec had expressed strong interest in penetrating the Asian market in recent years, its total overseas sales had only made up an estimated 3 percent of its total volume since 2007. The lack of knowledge of these markets, lack of Sinopec brand awareness in these markets, and the strong and established competition that is already in place are the key reasons why Sinopecs exports are limited presently, Kline said in its 2009 assessment.

In June 2007, ItalSing Petroleum and Singapore Petroleum Co. began toll manufacturing Sinopecs branded lubricant products in Singapore. Kline noted the Singapore agreement was another way to help develop Sinopecs overseas market in the future.

Kline said it anticipated Sinopec would make impressive progress in the mainstream market over the next five years, while its presence in the high-end market will definitely improve, especially in the automotive market segment.

Sinopec Lubricant Co., headquartered in Beijing, is a wholly-owned subsidiary of state-owned Sinopec Group. Sinopec Lubricant Co. officially registered its Singapore subsidiary in May 2010.