Pakistan: Lots of Promise, Problems


DUBAI, U.A.E. – Pakistans lubricant market is vibrant and lucrative despite a glut of counterfeit and smuggled lubricants and industries hobbled by power shortages.

Yasin H. Risvi, Karachi-based vice president of Total Oil Pakistan and chairman of the Lubricants Business Society of Pakistan, provided an overview of Pakistans base oil and lubricants markets at the ICIS Middle Eastern Base Oils & Lubricants Conference here in October.

Pakistan has the opportunity to become Asias trade, energy and transport corridor, said Risvi, with its strategic location linking the energy-rich Middle East, land-locked energy-rich Central Asia, and booming China, India and East Asia.

The lubricant market has lots of potential to grow, particularly the fast-growing market for motorcycle oils, he said.

National Refinery Ltd. is Pakistans only domestic base oil refiner, with capacity to produce 38,000 barrels per day (about 200,000 metric tons per year) of solvent-refined API Group I base oil. It produces both high viscosity index and medium VI grades, Risvi noted, and satisfies the countrys demand for Group I. In addition, NRL exports excess stocks.

There are 60-plus blending plants in Pakistan, of which 31 are reclaimed oil blenders. The country has 21 legally sanctioned used oil reclamation plants with combined production of 70,000 t/y, Risvi said. But most used oil is sold to illegal plants that have primitive methods of reclamation. These illegal operations supply reclaimed oil for counterfeit lubricants.

There is a lot of counterfeit oil of Shell, Caltex, Mobil and Total present in the market in Pakistan.

The total base oil market is about 248,000 t/y, consisting of locally produced virgin oil (138,000 tons), legally reclaimed base oil (70,000 t), imported Group II and III (20,000 t), and estimated illegally reclaimed oil (20,000 t).

Although NRLs Group I production exceeds current demand, oil companies in Pakistan are forced to import Group I because of concerns about NRL shutdowns. This reveals our vulnerability in relying on a single source, noted Risvi.

Both NRL and Pakistan Refinery, which currently refines fuels but not base oils, are evaluating the feasibility of Group II production. But this is a study only for now, Risvi added.

The countrys finished lubricants market reached 319,000 tons in 2011, Risvi estimated. This demand was met by the multinational majors Total, Shell and Caltex (32 percent), Pakistan State Oil (11 percent), other national and international brands, including Mobil, Castrol and ZIC (14 percent), miscellaneous local and regional brands (17 percent), reclaimed oil (22 percent) and smuggled oil (4 percent).

The reclaimed sector is growing very fast because its very cheap, Risvi noted.

The passenger car and motorcycle engine oil markets, estimated to be 90,000 tons in 2011, are strong and growing fast. The market is currently dominated by API SG/SL, but will move gradually to SM and SN. Pakistan currently has nearly 3 million passenger cars (Suzuki has 55 percent of the market and Toyota has 30 percent), and 8 million motorcycles (Honda dominates with 40 percent).

Low per-capita income is fueling exponential growth in the motorcycle population, said Risvi. Yamaha is establishing the largest motorcycle plant in Pakistan, Chinese OEMs are expected to grow further, and new OEMs will enter the market in the near future.

The heavy-duty engine oil market, totaling 134,000 tons in 2011, had declined from 2007 to 2010 because of economic slowdown and devastating floods. Risvi predicted that the commercial automotive lubricant market will stay stagnant through 2015, although the construction sector will come back slowly.

The heavy-duty market will remain dominated by CD/CF/CF-4 oils while the market for CH-4 will gradually move to CI-4.

All the automotive OEMs are selling genuine oils – that is, OEM-branded oils – in Pakistan, said Risvi. The genuine oil business is booming. Toyota Motor Oil and Honda Motor Oil are doing well, and both Hino and Suzuki have launched their own genuine oils.

On the industrial lubricant side, the lubricant market for the energy sector will continue to grow due to increasing demand for power, said Risvi. However, demand for many general industrial lubricants is flat or declining because many industries, including textiles, fertilizer and cement, are crippled by power and gas shortages.

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