Valvoline Steps over BP into Russia

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U.S. lubricants and chemicals producer Ashland Inc. and Russias TNK-BP signed a five-year agreement to distribute Valvoline passenger car products in Russia, both companies said last week. Financial terms were not disclosed.

While the deal focuses on supplying passenger car motor oils, it includes transmission oils, brake fluids, car and engine care products and coolants, Jennifer Knoblach, Ashlands EMEA communications manager, told Lube Report. Valvoline can rely on an extensive network of facilities worldwide to serve the needs of the Russian market which primarily will be supplied via facilities in the Netherlands and the U.S, she said in an email from Netherlands. Ashland Consumer Market owns the Valvoline brand.

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Moscow-based TNK-BP, Russias third largest oil company, is a 50-50 joint venture between BP and the AAR (Alfa Group/Access Industries/Renova) consortium, a group of Russian businessmen. Because Valvoline is BP Castrols global competitor, the agreement caused a stir in the Russian media over why the Russo-British JV sealed a deal with a fierce BP competitor.

The lubricants business is not part of the JVs shareholder agreement, Alfredo Barrios, companys executive vice president for downstream operations, clarified to Lube Report. Thats why BP Castrol products are not used by TNK-BPs lubricants segment, Barrios added.

The Russian lubricants business operates through TNK Lubricants, an independent company. TNK-BP manages separate networks of gas stations where it retails its products. TNK network [will] market Valvoline products while BP network markets its Castrol lubricants, Barrios said.

Russia is the biggest passenger car lubricants market in Europe, Sam Mitchell, president of Ashland Consumer Market, said in a press release announcing the agreement. [Because] it is still growing year on year, Russia represents a significant opportunity for motor oils, particularly with the increasing popularity of Western cars, Mitchell said.

He said that Valvoline premium products will have access to 15,000 retail stores across the country.

The Covington, Ky.-based company expects its sales in Russia to significantly expand over the next five years, both in volume and share. Ashland is also looking at the distant possibility of opening production facilities in the country. Valvoline’s focus now is on building our partnership and market share through importing products; the question of local blending is not on the table today. However, we do not rule out the possibility of local blending and production for the future, Knoblach said.

TNK-BP welcomed the deal as the beginning of a productive relationship between the two companies that could offer the Russian market new levels of service and customer support.

The agreement extends the range of high-quality lubricants available to our customers and strengthens TNK-BPs leadership in the Russian premium lubricants market, said Barrios. Since it is a five-year distribution agreement it could be worth hundreds of millions of U.S. dollars, according to some industry observers.

After Lukoil and Rosneft, TNK is the third biggest lube marketer in Russia. After upgrading its lubricants production facility in Ryazan, it expects to capture up to 20 percent of the Russian lubricants market in coming years.

TNK-BP operates a 250,000 tons per year API Group I base oil plant in Yaroslavl, under the Slavneft joint venture with the Russian oil major Gazprom Neft. That facility is scheduled to be upgraded to produce 100,000 t/y of Group III base oil by 2014, to be shared equally between both companies.

Ashland markets lubricants and specialty chemicals in more than 100 countries around the world in wide variety of markets and applications, including automotive, construction, energy, architectural coatings, food and beverage, personal care, pharmaceutical, tissue and towel, and water treatment.

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