NEW ORLEANS-The old Equilon Lubricants business may have shrunk when Shell bought out partner Texaco last month. But Shell officials have ambitious plans to grow it into the most profitable lubes business in the United States.
Shells plans, unveiled in a series of meetings with distributors over the past five weeks, call for large-scale growth in a variety of areas. Officials say a major focus will be in the industrial segment, where the company is introducing hundreds of new products. It hopes to develop a profitable service business where previously it had almost none.
Shell is also launching its own chain of quick lubes, Shell Rapid Lube. Officials said that owners of 200 Texaco Xpress Lubes have already committed to convert, and they expect that number to double eventually.
The company foresees growth in automotive lubricants, in both the heavy-duty and passenger car motor oil segments. For the latter, Shell is considering a U.S. introduction of its Helix line or an acquisition to obtain a well-recognized brand name.
Named to head the U.S. lubes business is Alan Kirkley, who joined Shell in 1980 and who most recently ran Equilons Norco refinery north of New Orleans. Kirkley and other officials hosted distributors in New Orleans yesterday and today in the last of four regional meetings to paint a picture of the new lubricants business and pitch their vision for its future.
The most noticeable immediate change has been a sharp reduction in the number of distributors, from approximately 750 to 317. Officials said the latter number includes distributors who have committed to convert from Texaco to Shell products but have yet to do so. Some of the 317 distributors will also carry brands other than Shell.
Officials said the Equilon distributors not converted accounted for approximately 10 percent of sales. Overall, Shells U.S. lubes business is approximately one-quarter smaller than Equilons and ranks second to ExxonMobil for profitability.
The reality is were going to be a smaller company in the near future than we have been, Kirkley said. But once the transition is complete, we are going to be filling the glass.
Officials say the business biggest opportunity for growth is in the industrial segment. They have already developed plans to increase industrial product offerings from 207 to 352. Some of those are former Texaco products. The purchase of Texacos stake in Equilon included permanent rights to all Texaco and Shell lubricant formulas existing at the time of the transaction.
Shell is also introducing 27 new services. Vice President for Sales and Marketing Larry G. Cekella acknowledged that Shells service offerings in the U.S. prior to the transaction were minor to none. The company is not developing services from scratch, though; existing overseas programs are being introduced to the United States, and Shell also retained former Texaco employees involved in services. The U.S. market for services offered by Shell is $172 billion, Cekella said.
Equilon Enterprises was a joint venture created in 1998 when Shell and Texaco combined their refining and marketing operations in the western United States, as well as their transportation and lubricants operations for the entire country. Shell was majority owner, with 56 percent.
Texaco sold its stake – along with its share of Motiva Enterprises, a joint venture with Shell and Saudi Refining Inc. – in order to gain approval from the U.S. Federal Trade Commission for its merger with Chevron. Shell is now sole owner of Equilon, which it has renamed Shell Oil Products U.S.