Wayne Petersen, business development manager with Melbourne-based Hilditch Pty Ltd., an independent international trading company, provided a rare overview of Australias lubricants and base oil markets at the ICIS Asian Base Oils & Lubricants Conference here on June 24.

The key factors driving the countrys 435,000 metric ton per year lubricant industry, said Petersen, are demographics and its major industries. Australia is huge, an area of more than 7.7 million square kilometers, more than twice the area of Europe, but home to just 22 million people. Sixty percent live in just five state capitals: Sydney, Melbourne, Brisbane, Perth and Adelaide.

While the global recession has hit Australia, it continues to report positive, albeit very modest, economic growth, said Petersen. A resource-rich country, Australias major industries are mining, which has been impacted by the economic downturn, and agriculture, which is enduring a devastating drought. Mining centers, noted Petersen, are far from the population centers, which makes lubricant supply difficult.

Our lubricant market is driven by high quality lubricants, Petersen said. Estimates of the lube market range from 420,000 to 450,000 t/y, so he believed 435,000 t/y is a reasonable figure. The lube market is mature, showing annual growth of only about 0.1 percent, very flat compared to the Asia/Pacific region as a whole.

A significant proportion of lubricants, about 90 percent, are manufactured on the East Coast of Australia, said Petersen, and there is an increasing trend towards import of finished goods.

In terms of product types, diesel engine oils account for 24 percent by volume of total lubricant sales; petrol (gasoline) engine oils, 19 percent; process oils and industrial oils, 12 percent each; hydraulic oils, 11 percent; automotive transmission fluids, 7 percent; automotive gear oils, marine oils and greases, 4 percent each; and metalworking, railroad and other lubricants, the remaining 3 percent. Now gasoline engine oil volumes are decreasing while diesel oils have stayed the same, Petersen said.

The Australian lubes market is dominated by multinational companies, Petersen said. These companies represent over 75 percent of finished lubricant sales: BP/Castrol, Caltex (Chevron), Mobil, Shell, Valvoline and Fuchs.

However, with multinational companies increasingly focused on large accounts, local companies are finding opportunities for growth.

Petersen estimated the key players lube market shares as: BP/Castrol, 31 percent; Caltex, 13 percent; Mobil and Shell, 14 percent each; Fuchs, 9 percent; Valvoline, 8 percent; and others, 11 percent. Twenty years ago, Shell and Mobil were 25 percent each, Petersen added.

Australia has seen significant rationalization of its lubricant manufacturing. In 1980, most multinationals had blending plans in Brisbane, Sydney, Melbourne, Adelaide and Perth. Today, most companies have only one blend plant. In addition, some are sharing manufacturing resources. For example, said Petersen, ALMC, or Australasian Lubricants Manufacturing Co., is a fifty-fifty joint venture between BP and Caltex.

Rationalization has also impacted Australias base oil refineries. In 2002, four refineries had combined capacity to produce 790,000 tons per year of base oils. Now there is just one, the Caltex Kurnell refinery with 190,000 t/y of capacity. Most base oil is imported, Petersen said.