In little over a decade since LUKOIL Lubricants Company was founded, the business has established itself not only as market leader in Russia but as a major player in the lubricants industry globally.

Its automotive and industrial products are now sold in more than 40 countries, while its marine oils segment serves in excess of 100.

The business – a subsidiary of Russias largest privately-owned oil company – has grown rapidly since it was formed in 2005. Despite tough economic conditions and an increasingly competitive marketplace, LUKOIL Lubricants has cemented its status as a technological leader, leveraging its knowledge and expertise to achieve sustained growth.

The business boasts its own high-quality raw materials as well as modern production facilities that meet the latest international standards. It currently produces lubricants at seven sites in Russia and Europe, has two joint ventures and operates from more than 20 contracted plants across five continents.

As a key supplier, it is proud to offer advanced products and customized service solutions. To achieve this, it is committed to further improving efficiencies and staying ahead of competitors by introducing new technologies and breaking into niche markets.

Innovation is the cornerstone of the companys strategy, and it has built a portfolio of over 700 products, as well as some specifically developed for leading global original equipment manufacturers.

Another Positive Year

Results have again been strong, with total lubricant production climbing by 8.8 percent in 2017 to a total of around 1.13 million metric tons. Sales of LUKOIL-branded finished oils have leapt by almost 14 percent to 585,000 tons over the same period.

In the past year, LUKOILs share in the global marine lubricants market has increased from 10 percent to 12 percent – a particular achievement given a stagnant market.

According to recently-appointed CEO Kirill Vereta, the companys success is testament to its focus not only on research and development and forming strong relationships with OEMs, but in expanding its footprint beyond its borders to establish itself in key growth markets.

In order to be competitive on the international market, we are moving step by step from local contracts to global partnerships, says Vereta.

Securing Partnerships

From initially being a supplier of first fill oils solely for the Russian automotive and industrial sector just 12 years ago, today it is recognized as the main supplier of international automotive plants in Russia and the CIS countries, as well as the only Russian lubes brand cooperating with car manufacturers in Europe and other regions.

With contracts having been agreed with Volkswagen, Ford-Sollers, Renault-Nissan-Mitsubishi and MAN, all foreign-owned engine plants in Russia are also now LUKOIL customers.

LUKOIL has successfully adapted its production, logistics and documentation processes to meet not only international standards but the very specific requirements of individual car manufacturers.

As a result, its plants in Perm, Russia, and in Austrias capital, Vienna, have recently passed audits by Renault-Nissan-Mitsubishi, meaning its products can now be supplied to all plants owned by the carmakers alliance worldwide.

The Perm plant has also been recognized as fully compliant with Fords Quality System Q1 and Volkswagens Formel Q quality control systems, and was certified by the VDA – the German Association of the Automotive Industry – for meeting its VDA 6.3 standard.

Ever-expanding Footprint

Following the success of its marine lubricants business in over 100 countries, LUKOIL is keen to expand into new markets for its automotive and industrial oils too.

Opening an office in China saw sales volumes double in the country and LUKOIL is bullish that the construction of a 100,000 tons per year blending plant in Kazakhstan will further help strengthen its position in Asia. The facility is due for completion in early 2019.

Key relationships have been built with several Chinese OEMs, particularly within the industrial equipment and car manufacturing sectors. Among them is an agreement to supply lubricants to Chery in China, one of the countrys leading car manufacturers, as well as first and service fill oil supplies in Russia to another large Chinese car manufacturer, Lifan.

Beyond Asia, LUKOIL has also turned its attention to the rapidly-growing Latin American and African markets. In 2017, it registered a subsidiary in Mexico and already has more than 50 products being manufactured there for industrial and commercial vehicles. In the coming months, LUKOIL is planning to introduce its GENESIS engine oils to the domestic market for passenger cars as well. The African subsidiary is due to open later this year.

We are a young brand which is making its first, but large steps, into new regions. It is necessary if we want to be a global player. As for Latin America, China and African countries, Russian brands have been attractive there historically so these can be strong areas for us, says Vereta. They are not mature markets and are still growing, so we need to be there. Besides, we want to gain a solid foothold in Mexico and China as they are major automotive industry centers. It will give us an opportunity to participate in global tenders of leading OEMs.

Base Oils Investment

LUKOIL currently produces API Group I base oils, including brightstock, and Group III+ but is continuing to invest in expanding its capabilities. Plans are underway to add Group II and II+ to its portfolio later this autumn. This will eventually see third-party base oil components replaced in premium products, opening new avenues for growth.

Next year, we will have Group II, II+, III and III+ (VHVI) base oils in addition to brightstock and hydraulic oils base in Volgograd, says Vereta. We will continue production of Group I base oils at our Perm plant. The large-scale production of Group II and II+ will begin after 2020, when the company reformulates major premium products involving third-party Group II, its own Group I and receives key approvals for new finished products from OEMS.

Initial test runs demonstrated that its Volgograd refinery could capably produce these new base oils simply by employing new techniques and processes. By using existing equipment, there was no need for significant capital investment.This was a real breakthrough, and shows the true know-how of LUKOIL, adds Vereta. Implementation of this technology will involve minor investments, in contrast to our local competitors who had to build new units and invest hundreds of millions of dollars in conventional technologies offered by foreign majors. We believe the quality of our base oils is superior to our rivals.

Lab tests are underway to examine using these new base oils for developing and reformulating products, he adds. There is also potential to expand LUKOILs additives range by developing products based on Group II+ base oils.

Preparing for the Future

LUKOIL continues to monitor the ever-changing trends in industrial equipment manufacturing and the automotive sector, extend its offering and create new next-generation products. This past year it has developed around 50 new lines, received over 110 approvals from industrial OEMs and 190 new approvals from leading car manufacturers.

The company became the first Russian manufacturer to be listed among SMS groups Top 10 Global Lubricants Suppliers and whose products have been included in ThyssenKrupps technical specifications.

With changing regulations and requirements and the push towards environmentally friendly fuels, LUKOIL is also committed to developing better fuel economy.

Our main strategy is to develop new products jointly with car manufacturers from the initial stage, says Vereta. Last year, we approved and developed a mid-term program, which includes 20 projects on passenger cars, heavy duty and industrial machinery.

The business is also collaborating with OEMs on an initiative to develop special greases, transmission oils and coolants for electric cars, which offer both lubricating and cooling properties.

It already produces its FLEX greases that can be used with electric vehicles, and since 2014 has been operating Russias largest grease production plant with Russian Railways. The site manufactures 120 different greases for various industries.

The greases business has been developing rather successfully at the Volgograd-based INTESMO plant, says Vereta Today, its products are delivered to 17 countries around the globe. The plants high-tech engineering center has already employed more than 200 different test methods.

Expanding the product line has been key to maintaining LUKOILs competitive advantage, he notes. In the near future, it intends to break into other niche markets such as white oils for food, medical and cosmetics manufacturers and TDAE (Treated Distillate Aromatic Extract) and TRAE (Treated Residual Aromatic Extract) for the tyre industry.

Among its other achievements last year, LUKOIL significantly expanded its line of metalworking fluids, which include water soluble LUKOIL FREO and oil-based LUKOIL INSO metalworking fluids. Russian automotive giants KAMAZ and GAZ are now carrying out field tests.

Production has also started on additives for the metalworking fluids, and there are plans to offer a wide portfolio of process fluids to be used in all stages of metal products manufacturing.

A five-year bitumen business development program, supported by around $100 million of investment, is also now underway. The program includes a new R&D center, which has already developed 20 new products. As well as further growing the portfolio, there are plans to modernize its plants and improve its logistics and export capabilities.

LUKOIL is preparing for the future, says Vereta. As we enter new markets and build new plants, we will have many new opportunities. Our focus on R&D and cooperation with OEMs underlines our goal for years to come. We arent just looking to the next few years but at long-term growth.