In April 2006, SK Corp. announced it had signed an agreement to build a $175 million Group III base oil plant in Indonesia with Pertamina. The plant, designed to make 7,500 barrels per day, is scheduled to come online in 2008.

Chang explained that in an era with severe competition, a strategic alliance is often an attractive option. Associating companies can combine their advantages and resources to become stronger and achieve a more competitive business model. The strategic alliance of co-branding between SK Energy of Korea and Pertamina of Indonesia leverages SK Energys superiority as a Group III lubricant company and Pertaminas advantage as Southeast Asias largest mineral lubricant company, Chang said.

SK has technology and overseas marketing expertise, he said, while Pertamina offers cost leadership and market leadership experience.

The first target of co-branding is to penetrate Pakistans mid-tier market, launching co-branded products from September 2008, he said. SK and Pertamina will develop cooperatively to expand subsequently to the other countries in the Asia Pacific Region.

According to estimates in consultant Kline and Companys study, Competitive Intelligence for the Global Lubricants Industry, 2006-2016, total demand for finished lubricants in Pakistan was an estimated 353,900 metric tons (390,104 U.S. tons) in 2006. Commercial automotive lubricants led the demand, with an estimated 173,500 metric tons, or 49 percent of the total volume. The Little Falls, N.J., based consultants said consumer automotive demand was next, with an estimated 91,000 metric tons or 25.7 percent of the total, while industrial lubes accounted for 89,400 metric tons or 25.3 percent of the total.

The overall Pakistan market is expected to grow at a 4.1 percent annual growth rate from 2006 to 2011, reaching 431,800 metric tons in 2011. Kline and Co. forecasts a 5.3 percent annual growth in total finished lubricants demand during 2011 to 2016, reaching 559,400 metric tons in 2016.