Gulf, Aegean Join to Sell Marine Lubes

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Gulf Oil Marine and Aegean Marine Petroleum Network plan to establish a global network and infrastructure for distribution and delivery of marine lubricants, expanding into a market dominated by major oil companies.

Through the partnership signed Feb. 2, Aegean will join the Sealub Alliance Network, a group recently formed by Gulf Oil Marine to distribute marine lubricants. By substantially increasing our joint global distribution network for marine lubricants to more than 450 ports, we expect to capitalize on our expanded scale and compete in a large number of markets traditionally led by major oil companies, said E. Nikolas Tavlarios, president of Aegean Marine Petroleum Network.

Founded last year by Gulf Oil Marine, the Sealub Alliance is dedicated to the supply of marine lubricants to the worldwide shipping industry. In a statement, Gulf Oil Marine said that by mid 2009, Sealub Alliance plans to deliver marine lubricants and services to more than 750 ports in 60 countries through expansion of its present members and by adding new members. Gulf said the alliance network now covers 500 ports in more than 50 countries.

The marine lubricants market amounts to about 2.6 million metric tons a year globally, said Stephen Ames, of SBA Consulting in Pepper Pike, Ohio. One barrier to entry into the marine market is the ability to supply globally. Ive got to hand it to Gulf and Aegean that theyre trying to do that by distributing to more than 450 ports in 40 countries, he said. Thats the bare minimum you need to be a global supplier. But theyre starting from zero. Its not a high margin business – its actually quite a low margin business that revolves around volume.

Ames said the main obstacle is getting sufficient volume, as most ships are under contract. When it comes to lubricants, they generally sign a contract thats anywhere from two to five years with one of the major lubricant suppliers that supply their ship anywhere it goes in the world, he explained. So the ability to pick up new business is very difficult. Most marine lubricant suppliers either pick up the business when a ship is a new build in the shipyards, he continued, or they get it on changeover, when a ship owner or operator asks for bids following a contracts expiration.

He noted that Gulf Oils logistics costs will be quite high. Starting with zero volume, theyre not blending in a lot of these ports, Ames said. Its important to have low cost supplies in these ports around the world. If theyre blending in a couple of ports and then shipping to these other ports, those logistics costs make it difficult for them to compete. Thats why you only have five major marine suppliers today. According to Ames, those top five – in order of volume – are BP, ExxonMobil, Shell, Chevron and Total.

Gulf Oil Group announced the launch of Gulf Oil Marine in July 2008 as a dedicated and customized supply service for lubricants to the worldwide shipping industry.

Piraeus, Greece-based Aegean Marine Petroleum Network markets and physically supplies refined marine fuel and lubricants to ships in port and at sea. The company procures product from various sources – such as refineries, oil producers and traders – and resells it to customers across all major commercial shipping sectors and leading cruise lines. It has a global presence in 13 markets, including Vancouver, Montreal, Mexico, Jamaica, West Africa, Gibralter, the United Kingdom, Northern Europe, Greece, the United Arab Emirates, as well as Singapore. Aegean said it also plans to commence operations in Tangiers, Morocco, and Trinidad and Tobago in the Caribbean.

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