State-Run Nigerian Firm Enters Lubes Biz


LAGOS, Nigeria – Nigerian National Petroleum Corp. will partner with a local blender to enter the finished lubricants market in October, an NNPC subsidiary official confirmed to Lube Report at the first Nigerian Lubricant Summit here.

We are going into the lubricants business definitely, Chris Osarunwese, chief executive of subsidiary NNPC retail, told Lube Report on the sidelines of the recent Nigerian Lubricant Summit. We have an arrangement with a local blending plant which sources the base oils and additives and produces the lubricants on our behalf. It is a contract blending arrangement. So, it is the responsibility of the blender to source the base oils for us.

However, Osarunwese told Lube Report that the state-run corporation will get its own blending plant in the long run. Osarunwese disclosed that the corporations target is to corner 10 percent of the total Nigerian lubricant market, which was estimated to be just under 275,000 metric tons in 2012, according to Frost & Sullivan.

Emeka Obidike, executive secretary of the Lubricants Producers Association of Nigeria, said it is a welcome development for the NNPC to play in the lubricant sector, because the state-run business will gain a better appreciation for the challenges facing private sector blenders.

With government coming to play, they will feel the pains of private sector players, Obidike told Lube Report. They (NNPC) will help Lupan realize some of its challenges because they are now part of the sector.

Taiye Williams, managing director of Lubcon International, said that the exciting thing about the Nigerian lubricant sector is that it holds out opportunity for every player. Williams said it is laudable for the NNPC to partner with a local blender for its lubricant venture.

But Dr. John Erinne, CEO of Lagos-based Matrix Petrochemicals, does not share the excitement of other blenders. Erinne said the state-run petroleum corporation does not have any business playing in the lubricant sector.

I have a fundamental problem with the diversification of NNPC into the lubricants business, Erinne told Lube Report on the sidelines of the Nigerian Lubricant Summit.

The NNPC divested from African Petroleum (now Forte Oil), National Oil (now Conoil), and Unipetrol (now privatized as Oando) and then recreated NNPC downstream, he pointed out. It doesnt sit well – I dont understand it. NNPC can never be a successful marketer. Erinne said the state-run corporation could go into partnership with a local blender but in his estimation, the fundamentals of the business remains questionable.

Williams expresses worry that the NNPC might not be able to sustain a lubricant venture in the long run.

My worry is whether they will be able to really sustain it because of the issue that when government handles things, sometimes that can be disturbing, Williams said. Not because they dont mean well but for the fact that nobody is going to be held liable for ineptitude in certain things.

The summit was put together by CMC Connect Ltd. in collaboration with Nigerias Department of Petroleum Resources and consultancy Lubeservices Associates.

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