Finished Lubricants

An Update on the Russian Lubricants Market


An Update on the Russian Lubricants Market

Russia’s “special military operation”—the Kremlin’s legally sanctioned term for the country’s invasion of Ukraine—was a turning point for the lubricants market in Russia and the surrounding region. But the effects of the invasion have proven to be far-reaching and have effectively extended to touch the global lubricants market as well.

Occurring at a time when the world economy was already on volatile footing due to the COVID-19 pandemic, countries around the globe were unprepared for Russia’s war in Ukraine as well as the fallout from the subsequent Western campaign of harsh economic penalties leveled against the administration of President Vladimir Putin. 

These sanctions quickly ushered in additional disruptions in food and energy supplies, especially in Europe, that are still being felt today. These include but are not limited to rising inflation; unstable logistics; high fuel, lubricants and base oil prices; and increased shortages of many other commodities. 

Unprecedented Events

The war in Ukraine—aside from causing pain and suffering for millions of Ukrainian victims and refugees—brought with it unprecedented losses for the Western oil and energy supermajors, most of which have been deeply involved in the development of the Russian upstream and downstream sectors since the 1990s.

Only days after Feb. 24, 2022, when Putin ordered the invasion, Shell, BP, TotalEnergies and ExxonMobil all announced that they would exit several oil and gas joint ventures with Russian state majors. What’s more, they also made the decision to halt their production operations in the country. Some of these projects date back almost 30 years. 

These companies’ decision to withdraw from Russia was a unique one with very little precedent.  Neither the Western intervention in Libya in 2011 nor the United States’ military invasion of Iraq in 2003, for example, prevented oil majors from doing business as usual in the regions of northern Africa or the Middle East. However, the French, British and American management of the respective oil majors conveyed that they felt a moral obligation to do something to protest Russia’s unprovoked actions against Ukraine. 

The war in Ukraine is the first major war in Europe since World War II. 

Ben van Beurden, Shell’s chief operations officer at the time of the Russian invasion, said that “these societal challenges highlight the dilemma between putting pressure on the Russian government over its atrocities in Ukraine and ensuring stable, secure energy supplies across Europe.”

However, he did add a caveat: “But ultimately, it is for governments to decide on the incredibly difficult trade-offs that must be made during the war in Ukraine. We will continue to work with them to help manage the potential impacts on the security of energy supplies, particularly in Europe.” 

These trade-offs include the unprecedented solidarity of the peaceful world with Ukraine and the Group of Seven (also known as G-7) industrialized countries, which, along with the European Union and Australia, rallied to impose steep costs for Russia’s war machine. The measures came in several waves during 2022 as well as 2023. Russia’s export of oil has been the primary source for funding its war. Because of this, the G-7 led efforts to penalize Moscow by tailoring sanctions to largely affect the country’s oil trade. 

The swiftly adopted measures include a ban of imports into the EU on Russian crude oil and established price caps ($60/ barrel) on tanker movement of Russian crude. This ban took effect on December 5. The additional ban on imports of Russian refining products into the EU—such as naphtha, gasoline, diesel, base oils, lubricants, fuel oil, asphalt and vacuum gas oil—as well as a price cap on the tanker transportation of diesel took effect on February 5.

An Inside Look

Last spring, Shell, the global leader in the lubricants industry, left Russia and closed its state-of-the-art lubricants plant in Torzhok. One of the company’s largest lubricants plants, the Torzhok facility had capacity to make 180,000 tons of lubricants per year. Only a few months previous in October 2021, the company announced expansion of the facility to 270,000 t/y in response to then strong sales in the country and the surrounding region. That project carried a price tag of 6 billion rubles (U.S. $86 million) and was scheduled to be completed in 2023. However, in late May 2022, Shell was compelled to sell the plant to Lukoil, the only privately held Russian oil major and the top lube marketer in the country. The background of the deal was murky, and both companies have yet to disclose the price tag of the transaction.

In its quarterly report released in April 2022, Shell wrote off its Russian operation Shell Neft’s assets with valuation set at about U.S. $600 million. In the announcement for the report, it said it would write off a total of $4 billion to $5 billion asset value after pulling out of Russia.

ExxonMobil, TotalEnergies, Chevron and Idemitsu Kosan also pulled out of Russia to protest the war. ExxonMobil’s last working day in Russia was June 30, 2022. Total’s 70,000 t/y lubricant production factory in Kaluga is now dormant. 

Some opted out of the mainstream decision to completely shun Russia, chief among them being Germany’s Fuchs Petrolub SE. The company told Lubes’n’Greases that it stopped any delivery of product, technical support or raw materials from Germany to Russia to abide by the sanctions that ban shipping of Western technologies to the country. However, Fuchs’ Russia operation, which manages its 40,000 t/y blending plant in Kaluga, confirmed during webinars held for its customers in September and December that the plant continues to operate and that the company has plans to expand the product portfolio for the Russian market. 

Other lube makers decided to remain present in the country, too, such as Japan’s Totachi and Germany’s Bizol. 

All of the aforementioned companies that left the country announced that they would stop their sales of refined products, lubricants and chemicals to Russia. 

The exodus from Russia didn’t stop there, either. While a swath of domestic producers such as Lukoil, Gazpromneft-Lubricants or Rosneft, started announcing more “import substitution” and replacement of the missing Western-branded inventories, the Russian lubricants industry was hammered with yet another blow: the exit of the “Big Four” lubricant additive suppliers. Similar to the oil majors, Infineum, Lubrizol, Chevron Oronite and Afton Chemical all decided to leave the Russian market in protest of the war in Ukraine.

The Big Four supply the majority of the additive packages used by the global lubricants industry. As Lubes’n’Greases’ Lube Report reported on Sept. 6, 2022, the departure of additive companies from the country  “has hamstrung the ability of lube blenders in Russia to make products meeting the latest industry and original equipment manufacturer performance standards.”

Structural Transformation

Market sources have said that the Russian lubricant companies are now frenetically seeking replacement additives from other suppliers, primarily those from China, India or the Middle East. Lubes’n’Greases found that these sources all lack approvals for the latest European OEM engine oil specifications. Though at least one supplier, China’s Richful Lube Additive Co., sells additive components and some packages that meet API SP, API SN and API SM—the three latest passenger car engine oil specifications adopted by the American Petroleum Institute for the North American car market—the company, headquartered in Xinxiang, China, does not offer packages meeting recent ACEA specifications developed by the European Automobile Manufacturers Association nor European OEM standards.

Other potential replacement suppliers mentioned by a consultant, who spoked on condition of anonymity, do not offer products meeting recent ACEA or API specifications.

As a result, some Russian lubricant marketers are now challenged to manufacture engine oils recommended for the most recent model year of European cars, which make up a significant portion of the country’s vehicle parc.

“The owners of the newer model cars now face real threat of engine damage if they use the domestically produced oils, which are increasingly produced outside of the latest OEM specs but advertised as meeting those specs,” the consultant said.

These developments have plunged the Russian lubricants market into an unseen “structural transformation,” Viktor Pushkarev of the Moscow-based consultancy Autostat told Lubes’n’Greases

“We are seeing changing composition of the market players, changing availability of the commodities, new price levels and sale and consumption channels,” Pushkarev said. He also confirmed that all major international oil companies—including ExxonMobil, BP, Shell, TotalEnergies and Idemitsu—have already left Russia. 

Industry consultant Tamara Kandelaki, general director of InfoTek, a Moscow-based consultancy in the Russian petrochemical industry, said that this is a testing time for the Russian lubricants industry. It may rise to the occasion and show its resilience like many times before, or it may fall the other way. 

“We have the components. We have the capacities,” Kandelaki said. “And this is a chance for the domestic [lubricant] and additive makers. Or how they say now, a window of opportunity” is opening.” She added that the situation is not comfortable for Russian lubricant companies, but it is also not critical.

Western Brands Most Sought After

Not surprisingly, a year after the major Western brands’ withdrawal from Russia, they remain the most popular products in the country, according to a recent Autostat survey. In fact, among the three most sought-after motor oil brands in Russia in 2022, two were Western brands: Shell and Mobil.

Motor oil brands of companies that exited to protest Russia’s invasion of Ukraine are still available—in some cases in large quantities—because of distributors’ inventories and products that entered Russia through alternative routes. For instance, some products entered the country via reshipments from Turkey.

The products might be still available, but their sky-high prices and withdrawal of technical support from the suppliers have led to lower demand for these motor oils, according to B2X consultancy.

“Because of the enormous price hikes that on average have increased by 100%, the sale of these inventories is extended in a span of several months,” Pushkarev said.

However, B2X predicts that these oils will not disappear from the shelves in Russia altogether, as the market is constantly adapting to the new challenges and conditions. 

These adaptations include innovative state-sponsored policies, such as the introduction in 2022 of an expanded list of products for “parallel imports.” To stave off the economic isolation of the West, the Russian government is trying to streamline the country’s import business by encouraging Russian companies to ship Western products from third countries, avoiding any trademark or copyright provisions. Customs officials often do not ask for such documentation.

These products, including lubricants that lack market presence in Russia, are free to be imported with no additional import fees, trademark declarations or dues.

It remains to be seen if this grey economy of “parallel imports” can work in the longer term. 

One thing that is fairly certain, however is that the Russian lubricants industry is now hanging in the balance as the country’s leadership attempts to put the economy on a war footing.  

Boris Kamchev is a staff writer with Lubes’n’Greases. Contact him at