For Per Klinstam, president of Belgium-based Ergon Europe MEA, the companys entrance into the South African and the sub-Saharan markets is an important step in Ergons strategy to make its naphthenic oils available across the globe. In Orbichem, we have found an ideal partner to achieve steady, long-term growth in the region, Klinstam said in a news release.

According to analysts who spoke to Lube Report at the ICIS African Base Oils & Lubricants Conference held in Cape Town, South Africa, in early November, the African naphthenic market had been long dominated by one player – Nynas – and the entrance of Ergon will increase competition in the market.

However, Orbichems Classen told Lube Report, Africa is a huge market for naphthenic that will accommodate everybody.

Valentina Serra-Holm, Stockholm, Sweden-based Nynas ABs marketing director for naphthenics, said Nynas strongly believes in the African market and has been active there for more than 15 years, with direct sales handled from its sales office in Johannesburg, covering the entire African continent.

In the region naphthenic oils are primarily used as insulating oils in the electrical industry, Serra-Holm told Lube Report. Historically there have been three main actors active in the electrical market – namely Nynas, Shell and Engen.

Nynas see a good growth potential for naphthenics in the region, mainly under the drive of the electrical industry, with regards to generation, transmission and distribution of power, she said. We also believe that there is a growing demand in the lubricant industry, especially related to the needs of the mining industry. Finally, the global HSE (health, safety and environment) and quality trends will be most likely followed quickly in South Africa due to the need to maintain and develop exports towards other regions, and this trend will favor the penetration of naphthenic process oils.

George Morvey, industry manager for consultancy Kline & Co.s Energy Practice, said that Ergons entrance to the African naphthenic market makes sense and that the continent offers growth opportunities for Ergons product line, especially in electrical transformer and switchgear applications.

As country markets on the continent install new and expand existing power generation infrastructure, this will create the demand pull for Ergons products and services, Morvey told Lube Report. In addition to supplying product, I would suspect that Ergon will transfer its current experience and technical capabilities in the power generation segment to operators on the continent, which could be a potential barrier to entry for its competitors.

Orbichems Classen agreed, noting, We are looking at the potential infrastructure projects in rural electrification.

Another analyst with knowledge of the naphthenic market in Africa told Lube Report that whoever wins the logistic challenge will win the naphthenic market in Africa.

Classen agreed that logistics are critical to the naphthenic market on the continent, noting that Orbichem is working to establish a business hub in Africa. We already have storage tanks dedicated to naphthenic in Durban, South Africa, he said. We have converted our [API] Group I tanks and dedicated them to naphthenic oil. In the short term, we are going to utilize our existing facilities but as it grows, we have plans to acquire more tanks.

He said Orbichem is also looking to find partners in the rest of Africa, including in Nigeria, Ghana, Kenya, and Tanzania. We will look for the right partnership in these countries and utilize their existing capacity, storage, distribution and technical capabilities, he said.

He told Lube Report that Orbichem, headquartered in Cape Town, South Africa, is very experienced, with the requisite technical and logistical expertise which it will utilize in marketing Ergons products in Africa. Orbichem is now part of a larger South African development conglomerate called Calulo, and Calulo has great expertise in logistics, said Classen.