In other ways, however, the market has made significant strides during the past decade. The number of sources supplying the region has diversified. In some cases the supply chain has streamlined making the market more competitive. The government has made some progress against the practice of untreated base oils being sold as lubricants, although the problem has not been entirely eliminated. All of these improvements have benefitted lubricant blenders in the region.

The base oil market in West Africa has always been complicated by the lack or inconsistency of supply. This vast area has a single base oil plant, Nigerian National Petroleum Corp.s Kaduna Refining & Petrochemical Co. in Kaduna, Nigeria. It produces API Group I base oils – the category that is mostly used in the region – but the refinery has been dogged with problems over the years. Fires and unplanned shutdowns have been commonplace, and over the last fifteen to twenty years it has produced very little base oil.

As a result, the region has depended very much on imports – in some cases of base stocks but in others of finished lubricants that were sent to hubs in West Africa for inland supply via chains of distributors. Some of these distributors later became blenders.

Some parts of West Africa have traditionally been supplied by oil companies from former colonizing nations. For example, blenders in Mauritania, Cote dIvoire and Senegal were supplied for many years by French producers such as Elf and Total. Going further back, parts of the Democratic Republic of Congo were supplied by Petrofina, a Belgian company, while Ghana was supplied by British sourced product until some 10 to 15 years ago.

Until the turn of the century, conservative procurement practices ensured that almost all of West Africas base oil imports originated from European producers. Since that time, the market has been opened up with the inclusion of base oils from sources such as the United States, Brazil, and, on the odd occasion, even Thailand.

For a number of reasons, Nigeria is the regions largest importer. The main reason is that the country is the largest finished lubricant market in West Africa, with a huge demand for engine oils for cars and trucks and many types of industrial and process oils.

The market in Nigeria has seen some fundamental changes over the past 20 years. Formerly all imports were conducted through NNPC or African Petroleum. After the end of military rule in 1999, the market was liberalized, and applications for licenses for the importation of all petroleum products were opened up to any suitable company registered and operating within Nigeria. The criteria laid down by government for license application were comprehensive and considerable, but in many cases were not fully followed.

Basically, if a company had access to local bulk storage, then it could obtain an import license solely on the basis of controlling the facilities to store and dispense petroleum products. Storage for base oils was at a premium at the main discharge port of Apapa, in Lagos, but there were other facilities further afield at locations such as Port Harcourt and Warri. Storage facilities were often leased to third parties who had the financial facilities in place to transact deals for base oils and other petroleum products.

Having such financial facilities became critical for Nigerian receivers. The government requires companies to bid for foreign currency needed to put payment instruments in place, and successful bids require a level of banking clout. Letters of credit were issued by local banks but required confirmation from corresponding prime European banks, due to country risk and the somewhat fragile domestic banking system.

In the early days of deregulation, Nigeria became notorious for importing large cargoes of bright stock – without any other grades accompanying, which was unusual in the greater industry – and packaging it in bottles and other containers, completely absent of chemical additives, to be sold as finished diesel engine oil. Vehicles were not exactly state of the art, so these lubricants were often burned, essentially creating a total loss system. The problem is such practices are ill suited for high speed diesel engines. While it is generally accepted that the high ambient temperatures in a country such as Nigeria require engine oils of higher viscosity, this was going a little too far.

In response to complaints by recognized lube marketers such as Castrol, Shell, Total and Agip – all of which operated blending plants within the area – NNPC eventually took a number of steps to eradicate the bright stock scam. The import license criteria were tightened, requiring importers to operate blending plants or have contracts with those that do in order to supply base oils on their behalf. Cargoes had to contain more than one grade of base oil. The system, however, was open to abuse, and so the country continued to import disproportionately large volumes of bright stock.

Flexibility was and still is the name of the game in supplying base oils to Nigeria, always on a CFR (cost and freight, which includes shipping costs) basis. The business could only be carried out by traders since oil majors have strict payment terms that did not allow the variance sometimes required to transact these deals. It was not uncommon for receivers to back out at the last minute, after a cargo was loaded, or for price negotiations to take place when the cargo was on the water. Frequently letters of credit were not opened in time to meet load dates of vessels that were already fixed to deliver a cargo.

Shipments discharging in Lagos always face the threat of demurrage – delays beyond the contracted delivery date that obligate the charterer to reimburse the ship operator. Such delays are common in Lagos due to berthing congestion, local documentation not being ready or problems regarding the payment letter of credit.

Over time the import scene has changed, with many local receivers now acting also as procurement agencies, traders, charterers and finally importers. This practice of cutting out the middle men to save money has made the Nigerian base oil business more competitive and perhaps more lucrative for the companies taking on these roles. Some traders are still around, since some importers do not have the expertise to purchase, charter and arrange financing according to the terms that sellers in Europe or U.S would insist upon. So the trade continues in varying forms, with some buyers assuming responsibility for transportation and others sitting tight until shipments reach Nigeria.

Supply options have also changed considerably. Whereas traditionally Nigerian imports had to meet strict specification requirements, particularly in terms of viscosity index and color, these demands have relaxed in order to accommodate lower priced material from sources such as Russian refiners shipping through Baltic ports.

Naphthenic cargoes from Venezuela have been utilized by some blenders to formulate transformer and other electrical oils. At the same time, more and more parcels of base oils are being delivered in flexi-bags instead of trucks, which control quality and pilferage. These methods are ideally suited for movements into hinterland regions such as Niger and Cameroon.

As yet there are no announced plans for new base oil capacity in the region. Kaduna is still quoted as producing Group I grades. There are rumors of talks between Korean and Chinese investors to consider providing the technology, capital and expertise to build units that would produce Group II or Group III oils.

The real question is whether the Nigerian and West Africa markets are ready for lubricants that perform better but cost more. The answer is probably not yet.