Local companies are coming forward to rule the base oil or lubricating oil market competing with global brands, amid a major concern over the quality of the locally blended products.
Omera Lubricants of MJL Bangladesh Ltd, BNO Lubricants of Lub-of Bangladesh Limited, and Soil of Sigma Oil Industries Ltd are the pioneers in establishing local brands that have entered the blended oil market after 2010.
Usually, the base oil is used in automobiles, factories, power plants, and the agriculture and marine sectors.
Entrepreneurs and investors believe this is high time to develop local brands as the base oil-using sectors are growing fast.
Mohammed Yousuf, managing director and founder of Lube-reef which produces and markets base oil under the brand name of BNO, said it is partially true that all companies aren’t supplying quality products.
“However, we, who believe in the made-in-Bangladesh spirit, always emphasize quality products that would challenge global brands. We also inspire others to produce high-grade products,” he added.
Mohammed Yousuf said the company is investing an additional Tk600 crore to expand its business.
In 2014, BNO Lubricants’ total revenue was Tk70 crore and in the last six years, the brand has registered a 141% growth in revenue to Tk169 crore in 2020 while market leader Mobil’s sales fell 12% over the years.
Inspired by the growth of local brands, other large companies have also started investing in this sector. One of the country’s largest business conglomerates Pran-RFL Group is eying to launch its manufacturing facility soon.
At present, the group is sourcing base oil from Mega Lubricants Limited for its primary marketing under Saudia and RFL brands.
Mir Lutfar Rahman, head of operations at Pran RFL Group, told The Business Standard, “We are expecting a lube oil manufacturing license this year to set up a blending factory in Cumilla. Primarily, we are planning to invest Tk100 crore in the factory which will have a capacity of blending 24,000 tonnes annually.”
Low-grade products are the main challenge
Currently, the country’s annual lube oil demand is around 1.2 lakh tonnes and the market size of the industry is around Tk3,500 crore.
Some 46% of the country’s demand is controlled by global brands and the remaining 54% comes from non-brands and local manufacturers.
But several stakeholders and experts are concerned about the quality of the locally blended lube oil products.
They said the production of quality lubricants is essential as Bangladesh is migrating from light to medium and high-tech industries but the country is allowing the production of very low-grade lube oil which is globally obsolete.
Masud Parvez, an independent consultant of base oil who has 17 years of working experience with different brands such as ExxonMobil, said around 97-98% of the locally produced oil is of low grade.
He said, “And due to a lack of literacy and tendency of purchasing cheap, people use such a low-grade base oil that it reduces the engines’ expected lifespan and increases fuel consumption.”
Hence, individuals and industries are being deprived of getting quality and value-added service from engines. The authorities need to increase monitoring and enforcement of the law to stop counterfeit products, he suggested.
At present, most operators are supplying lube oil of SC and CC specifications for gasoline and diesel engines which are obsolete in many countries.
These specifications of lube oil were applicable for engines modeled 1967 and older.
Industry insiders said that the authority should be strict in supplying the minimum SG and CD standard of base oil for gasoline engines and CF & SF standard of lube oil for diesel engines, though these specifications were also obsoleted in different countries.
Denying such allegations, SanjitMandal, manager of Sigma Oil, said, “If we supply low-grade engine oil, we would not be able to establish our brand because we have to compete with global brands.”
He said we have invested Tk100 crore in our factory in Narayanganj for blending the high-grade lube oil, and the brand’s annual sales revenue is around Tk60 crore.
“Now, we are trying to produce synthetic lube which is claimed to be of premium quality,” he added.