Shell expanding Asia lubricants business on population, vehicle growth

A Shell logo outside a Shell petrol station.
A Shell logo outside a Shell petrol station.PHOTO: AFP

SINGAPORE (REUTERS) - Royal Dutch Shell plans to grow its lubricants business in Asia in the next five years, targeting surging vehicle sales and rising population growth, said a senior company official.

The company will focus on expanding the business in China and in member countries of the Association of Southeast Asian Nations (ASEAN), said Mark Gainsborough, executive vice president of Shell's global commercial division. It plans to open a new lubricants blending plant in Singapore in 2016, together with two other partners, following a plant opening in Indonesia late last year.

In China, Shell has invested heavily in the country, in terms of manpower and infrastructure in lubricants, despite the recent slowdown in economic growth there, said Mr Gainsborough pointing to its recent opening of a lubricants plant in Tianjin, China, its eighth such facility in the world's second largest oil consumer.

"A lot of demand growth is coming from Asia-Pacific, particularly from ASEAN markets or from China. Because you have growth in industry and growth in the vehicle population," he told Reuters in an interview at Shell's offices in Singapore."Over time, what we'll see is Asia becoming more and more important part of the demand mix for most products including lubricants."

Shell, one of the top global suppliers of lubricants that are used to minimize friction between moving parts in engines or components, is facing competition in Asia's growth markets following large investments by peers such as Total. Lubricants demand is seen to be strong thanks largely to strong private car sales, especially compared with other oil sectors. The global lubricants market typically grows at about half of gross domestic product growth, with most of the demand growth coming from Asia, said Mr Gainsborough.

Demand in North America and Europe is either flat or declining because of improving efficiencies in vehicles and industry that mean less lubricants are required, he said. Shell's commitment to expanding in China extends beyond manufacturing lubricants. In Shanghai, the company has opened a dedicated research centre to develop lubricant technology but it has also set up a commercial centre in the city that includes some of its downstream businesses, including lubricants.

Shell's retail fuel business should continue to see a boost from lower oil prices as people drive more, said Gainsborough. He also noted the firm is focusing on selling premium fuels, where it has been gaining traction among customers. The company is also exploring the use of biofuels and gas-to-liquid jet fuel in airplanes.