Investing in Lubricants Production, Packaging

By Godwin Uba

The impact of COVID-19 pandemic and resultant Lockdown on the Nigerian Economy and the entire world has changed the types and nature of investments to embark upon. We have taken time to look at those viable and profitable investments to make after the COVID-19 Pandemic and lockdowns in Nigeria.

One of the sectors to invest into is the oil and gas sector. Under this sector we see investing into production of lubricant as a very lucrative one.

The importance of engine oil cannot be over emphasized. Oil is the life of any engine. Its main role is to provide lubrication to moving parts and transfer heat. It keeps the moving parts from grinding against each other causing wear and damage.

The demand for engine oil in Nigeria is from vehicle owners, power generator owners, industries, tricycles and motorcyclists. Engine oil is used by both petrol and diesel engine oil, though in different grades. The petrol engine oil are used in serving passenger car (light cars) while diesel engine oil are used in servicing generators (small and big) and also for heavy cars (diesel cars).

There are still grades of diesel engine oil (mono grade and multi grade) mono grades are commonly used in Nigeria, although people are now beginning to appreciate multi grades. The viscosity of the oil is a function of the grade.

Statistics available confirms that the total world demand for lubricating oils is about 50 billion liters per annum (60 per cent automotive, 40 per cent industrial). However, the industrial lubricants account for more than 70 per cent of the total gross earnings and profit margin globally.

In Africa, Nigeria is said to be the third largest consumer of lubricating oils amounting to about 700 million liters (1 per cent of the world’s total demand), with a gross earnings of N150 billion in 2013 and over N450.37Billion as the end of Q1, 2021.

The cumulative assets base of the blending plants is about N20 billion, generating about N45 billion profit margins in 2013 and N120billion, generating about 300billion profit margin in the Q1, 2021.
Furthermore, it has been estimated that 75 per cent of the total need of lubricating oils is produced locally while the remaining 25 per cent are specialized products imported by the marketing companies into the country.

The Lubricant Oil Manufacturing industry produces petroleum-based lubricant and grease products, such as blended motor oils, brake-fluids, transmission fluids and lubricating machinery grease. The industry is heavily dependent on crude oil prices.

There are four (4) types of lubricants: Oil, Grease, Penetrating Lubricants, and Dry Lubricants. The two (2) most common lubricants dealing with on daily are oil and grease.

Major products of oil refineries includes asphalt, liquefied petroleum gas, diesel fuel, lubricating oils, fuel oils, gasoline, kerosene, paraffin wax, tar, petrochemicals. Lubricants (engine oil) are products of petroleum refinery. The raw materials required for the production of Lubricants are products of oil refineries which are readily available in Nigeria. It can be sourced from virgin material or through recycling.

The Lube market consists of two major segments, automotive and industrial, having a market share of 70 per cent and 30 per cent, respectively. Most of the competition is crowding into the first category.

In the automotive segment, while cars, Generators and two or three wheelers segment accounts for 65 per cent of the market, diesel operated engines, trucks and other heavy vehicles have the bulk share of 35 per cent.

The lubricating oil and grease are one of the most important sectors of the petrochemical industry. The size of lubricating oil and grease market in Nigeria is estimated at over N900 billion and it is growing at around 3.5 per cent annually.

The choice of site for this project was mainly consumer driven. The major consumers of this product are to the extent of 80 per cent plus, resident in the urban areas and mostly health sector. Besides, the fundamental business infrastructures are more readily available in the urban areas. Such facilities as electricity, good road system, experience manpower etc are better established in the urban areas. Though one can locate the project at any parts of the country, we advise that it is located close the market and raw materials.

The project can take off in a land space of 2 plots of land. The factory building must have five (5) major rooms namely Cloak Room, Packaging Material Room, Production Room, Finished Product Room, Raw Material Room. The factory will be located where there is no human residence within the compound.

The production process for engine oil involves procurement of base oil from refineries; the procured base oil is now filled into the blending plant after which additives such as detergents, anti-corrosive chemicals, dispersants are added. Heating and agitation simultaneously take place to achieve blending of the oil with the chemicals.

After blending, the product is allowed to cool down before being filled into various containers such as drums and kegs.

The required equipment and machines is Lube blending machine, oil filling machine, cap screwing machine, conveyor, and farm tank with total of 20,000liters, standby generator, delivery vans, interconnecting pipelines and finance.

The plant will cost about N38.5 million excluding land and building, but including machinery, generator and working capital requirement, which includes base oil stock.

There some legal and operational licenses that supposed to be obtained for smooth operations. All formulations and specifications of products to be manufactured should be forwarded to the Standards Organization of Nigeria (SON) for consideration and approval.

Samples of all blended batches should be retained for a period of not less than three months before disposal and be made available on demand for any desired quality verification test within this mandatory period of storage.

Upon completion of the construction of blending or recycling plant, an application for license to operate the plant should be forwarded to the Department of Petroleum Resources (DPR). Details on all legal and operational requirements will be given.

Implementations

For details on comprehensive & Bankable feasibility studies, Business Plan; procurement & installations of strong and durable machines, internationally acceptable packaging methods, Export markets and funding arrangements and Recruitment & Training of manpower please contact the writer. We assist in reviving of death manufacturing/ industrial projects. Some prospective investors would prefer to go to internet and copy pre-feasibility reports done in India or other parts of the world.

That type of report can never lead you in terms of knowledge and sourcing of your funds. The reports are not in the business environment with Nigeria, so it could be misleading. For details contact us
Uba is of the Global Trust Consulting and can be reached via ubagodwin@yahoo.com

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