Big Plans for Torzhok

Shell, the worlds biggest lubricants supplier, has clearly made a priority of the Russian market. Its business there started three decades ago, when it opened an office in Moscow. During the last two decades, the company expanded its lubricants sales network throughout the country, helped by around 70 official distributors and over 100 employees who support the companys petrochemical refining and distribution operations in Russia.

All this time, Shell imported packaged lubricants into Russia from its European plants, such as those in Grasbrook, Germany; Nanterre, France; Stanlow, United Kingdom; or Ghent, Belgium.

Now the companys production capabilities are catching up to its sales activities in Russia.

Last year, it opened a blending plant with capacity of 180,000 metric tons per year in Torzhok – the latest addition to a global lubes supply chain that employs 4,000 people at 50 complexes. The opening of the Torzhok plant was delayed twice, once from the end of 2010 to December 2011 and again to mid-2012. It finally opened in October and is now up and running. Shell officials said they expected it to produce 5 million liters (approximately 4,500 tons) in April.

Shell would like to increase that output dramatically.

Our main task is to use the plants maximum annual output, which is slated to top 200 million liters by the end of 2015, Plant Manager Konstantin Rubin told a LubesnGreases reporter visiting the facility in early February. We were studying several regions in the country and selected Torzhok for its excellent geographic position [the plant is located between Moscow and St. Petersburg, along one of the countrys main transportation corridors], its positive investment climate, accessible water and land resources and its ready pool of technically educated personnel.

Approximately 150 employees work in manufacturing and logistics functions at the plant, which features a simultaneous metered blending system. Officials said the facility may eventually produce up to 150 different types of products. At the moment, it makes premium motor oils and transmission fluids for passenger cars and commercial vehicles, as well as high quality industrial oils. At the end of this year, the plants product slate is expected to increase to 45 to 50 different types of lubricants, with further expansion in 2014, Shell said.

The company declined to disclose the volume of its finished lube sales in Russia but said it was responsible for around 20 percent of the countrys imported finished lubricant volume before the plant opened. The company has a strategic plan to increase its sales by following market demand trends, Rubin said.

He added that Shell will allow the Torzhok plant not only to use Shells base stocks, but also to buy additional base stocks from Russian suppliers if their quality meets Shells standards. Initially the plant is using 11 types of base oils produced in Shell plants and imported from Finland.

The Anglo-Dutch oil major sees Russia as a big strategic market not only for its upstream operations, but also for producing and marketing lubricants. One reason Shell invested 74 million in the Torzhok lube complex is that the country is the worlds fifth biggest finished lubricants market, with potential to grow larger.

To meet its goal of capturing a bigger portion of the Russian market, Shell said, its complex is equipped to supply bulk shipments to big industrial consumers. It will save [customers] time and cut costs on transportation and storage [of the lubes], the company said. Plant management is also pushing hard to establish a nearby export market. The first country on the list is Ukraine, one of the largest lubricant markets in Europe and site of existing Shell operations.

Launch Pad in Kazakhstan

Lukoil is Russias biggest lube marketer, but since 2007 has been expanding its presence abroad. It did this while maintaining its position as the top lubricants supplier in Ukraine and Belarus, both traditional markets for the company.

In addition to its four blending plants in Russia, Lukoil has a network of lubricant plants in Europe that it acquired during the past decade. The plants, located in Finland, Romania and Turkey, are meant to increase LLKs presence in the traditional markets of Southeast and Central Europe. However, Lukoil recently unveiled a plan to build a large blending plant in Kazakhstan.

At the moment, production, distribution and marketing of finished lubricants are fast growing segments of Lukoils business strategy. In 2012, the company sold 335,000 tons of packaged lubricants in Russia and abroad [up from 220,000 tons the year before], the company told LubesnGreases in February. [For us] Central Asia is one of the most important regions for oil business expansion.

This year, Lukoil is opening an office in the Kazakhstan capital of Almaty, planned as a headquarters for a new daughter company, Lubricants Central Asia. This arm of the company is responsible for production, supply and marketing in such markets as Kazakhstan and its neighbors, Afghanistan and Iraq.

It is also building a 100,000 t/y blending plant in the south of Kazakhstan, including a research and development center and logistics and distribution operations. The 77 million project is expected to begin operating in 2016 and to provide economic benefits to the local area by employing 300 workers. The plant is also slated to make up to 154 million in annual sales, the company said.

The blending plant in Kazakhstan was approved by the countrys leadership during a meeting between Lukoils president Vagit Alekperov and the Kazakh President Nursaltan Nazarbayev in early February. At the meeting, Lukoils president said his company is the biggest investor in Kazakhstans oil and gas sector, noting that it has been active in the country since the early 1990s. Alekperov also said that due to the support that President Nazarbayev has given to Lukoil in the last 20 years, the company was able to invest more than 5 billion in the Kazakh economy.

Gazprom Eyes Central Asia

Gazprom Neft is another Russian oil major with a stated priority to expand in Central Asian markets. After Lukoil, the company is the second biggest investor in the Kazakhstan lubricants and fuels market. In 2011, the company held 45 percent of the countrys lubricants sales.

To maintain its position as a major lubricants supplier in the region, Gazprom Neft last year opened a modern 70,000 t/y lubricants production complex at its Omsk refinery located in Western Siberia, close to the Kazakhstan border. It expects to finish an additional 110,000 t/y plant expansion by the end of this year.

Increasing the quality of finished products is among the highest priorities of our companys strategy, Alexey Miller, Gazproms president, said during the plants opening in early June 2012. The new [lubricants] complex at the Omsk refinery can only benefit modern lubricants production in Russia.

The complex includes a facility for lubes packaging production, a filling line, feedstock and finished products storage, as well as a modern tank storage facility. The system has the potential to automatically fill more than 350 different types of products, and the finished products warehouse has 10,000 tons of storage capacity, the company said.

Upon reaching full capacity by the end of 2013, the 180,000 t/y lubricants blending facility is expected to produce a wide assortment of industrial and automotive lubricants. The upgraded segment will produce Gazprom Nefts premium motor oil brands, and streaming is expected to start in the second quarter of 2013, according to Ivan Yakovlev, head of Gazprom Neft-SMs strategic marketing department.

At the moment, construction continues on the fully automated 110,000 t/y blending complex. The technologies used here will be the same as in our blending plant in Italy, he said.

Gazprom Neft operates a blending plant in Bari, Italy. Additionally it operates four other blending facilities, three in Russia and one in Serbia.