Singapore Seduces Sinopec


Last week Sinopec officially produced its first barrel of lubricants in Singapore. The Chinese government-owned oil companys new lubricants manufacturing operation in Singapore is its first offshore manufacturing base, a Singapore Economic Development Board official said last week.

It is noteworthy that Sinopec will be using ItalSing and AP Oil to produce its branded lubricant products in Singapore, said Chua Taik Him, assistant managing director of the economic development board. Both are Singapore companies with established manufacturing capabilities.

Contract lubricant manufacturer ItalSing Petroleum, started in 1993, is a 50-50 joint venture of ENI International B.V. and Singapore Petroleum Company. AP Oil International Ltd. was incorporated in 1975 as a lubricant distributor and first ventured into manufacturing in 1981. AP Oil is also involved intrading of base oils, additives and chemicals.

Singapore’s economic development board is also encouraging Sinopec to set up its regional headquarters, manufacturing and R&D activities in the country. With more than 2,300 Chinese companies now based in Singapore, there will be economy of scale to broaden the business value chain and synergies amongst the multinational companies based here, Him told a June 6 ceremony for the official launch.

Sinopec first established a trading operation in Singapore in the 1980s, according to Him, subsequently developing it into an international marketing outpost. And now, Singapore will be Sinopecs base to develop and build brand equity and manufacture its [lubricant] products, he added.

Sinopec said it values the Asia Pacific market, and believes production of lubricants in Singapore serves as a first step in its international development strategy.

After the production is realized in the Asia Pacific region, Sinopec will aggressively continue to seek common development with the markets of Asia Pacific region, providing comprehensive lubricant solutions for industrial customers in a timely and effective manner, the company said in a statement. At the same time, Sinopec will make use of its advantages in aerospace science and technology by developing featured lubricant oil products that adjust to the high temperature and high humidity of the Asia Pacific region.

Geeta Agashe, director of Kline and Co.’s Petroleum and Energy Practice, told Lube Report that Sinopec’s entry into the Singapore market suggests a first stepfor the Chinese company, making its presence more known in the international arena. “As ExxonMobil, Shell, BP, Total, Valvoline, Petronas, and the Japanese companies like Nippon Oil, Idemitsu and others compete in Sinopec’s backyard – China – Sinopec wants to compete against them in other Asia Pacific markets,” Agashe explained.

It also continues a worldwide trend among national oil companies seeking to compete in the regional and global arena, according to Agashe. Other examples of that include Petrobas of Brazil, Petronas of Malaysia, LukOil of Russia and Indian Oil of India.

She noted that Sinopec has taken significant steps in recent years to improve its lubricant brand awareness and image. Following its brand consolidation in 2002, she said, Sinopec started to increase its marketing investment in 2004 to build up its brand awareness and improve its image in the market. The company invested more than RMB 100 million (U.S. $13 million) on TV commercials on such popular channels as CCTV in 2004. The company continued the campaigns in 2005 and 2006, including on TV stations of targeted regions.

Sinopec also markets its brand via a series of special public events, she said, which has included sponsoring F1 Racing and the Beijing 2008 Olympic Games, providing lubricants for the successful shuttles of Shenzhou V and Shenzhou VI, and providing lubricants for the Chinese Polar Research vessel and icebreakers.

“All those activities and marketing efforts have helped the company to build up a strong lubricant brand reputation and to win a significant market share in China’s overall lubricant market,” she said.

In 2006, the sales volume of Lubricant Co., Sinopec Corp. was estimated at 1.2 million tons, according to Agashe. Sinopec, which leads in the automotive segment, was the number two leading lube marketer in China in 2006. PetroChina, which leads in the industrial market segment, was the leading lube marketer in China in 2006.

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