Technology will be the key driver for the growth of lubricants across all industrial segments

Siva Kasturi,
Asia Pacific Regional OEM Manager, Shell Global Lubricants,
The growth of manufacturing sector and automotive industry in India offers ample opportunities to lubricant manufacturers. Shell Lubricants is working on dimensions of technology, innovation, and application development, and is collaborating with OEMs to leverage on strong market potential in the Indian market. Siva Kasturi, Asia Pacific Regional OEM Manager, Shell Global Lubricants, shares his outlook on the emerging Indian market in an exclusive interview with Mittravinda Ranjan.

According to media reports, lubricants market witnessed marginal decline in 2015, what is the current market situation and what are the key focus areas for Shell Lubricants?
In my opinion there has not been any decline in the lubricants market. We have seen industries moving from conventional lubricants to specific high performance hydrocarbon derived lubricants. In fact, we are experiencing a higher amount of growth which will continue in the near foreseeable future. Though challenges will be there, development will be driven by the growth of commercial vehicles in the automotive sector and power sector which are doing very well. We are highly focused on developing application-based lubricants and are looking at steady margins in both the sectors.

What is the current valuation of global lubricants market and which segments is Shell focused on
The global lubricants industry was valued at USD 50 billion in 2016, and is growing at CAGR 2.5 per cent, and we are expecting a growth of about USD 65 billion by 2021. India is the 3rd largest market for lubricants globally but as a country, we have the lowest per capita consumption of lubricants. Considering the size of the market and the changing consumption pattern, India is definitely a high potential consumer market for lubricants.

Power utilities segment is one of our key focus areas where we offer total lubrication solutions for thermal, renewable and nuclear energy sectors and work very closely with OEMs related to gearboxes, hydraulics and stationary power engines. In the mining and construction segments we offer solutions to OEMs for gearboxes, compressor oils, compass fuels, hydraulic oils and greases. Shell Lubricants has been deeply committed to its customers in terms of reliability and quality of products and has been witnessing a good growth momentum with respect to its products and services.

Industrial lubricants business has lower margins as compared to lubricants for automotive industry. How does it become a value proposition for OEMs, especially from the small and medium scale segments?

At Shell Lubricants, we appreciate that being competitive in the global manufacturing market means meeting deadlines and constantly striving to increase production, reduce downtime and maintain product quality. Choosing the right lubricants and the services related to your needs can help to make a real difference to your entire operation. Lubricants are designed to increase productivity through enhanced efficiency, extended oil and equipment life through improved efficiency. There can be different analogies for the value propositions of lubricants in different segments. We believe in working with our customers in an integrated way to provide them with holistic solutions across industry value chains. Technology is making a lot of difference across the application of various products. Our OEMs are inclined towards the culture of our company due to the extensive research we put in our offerings to provide all the industry compliance related specifications required by our patrons. One such example is automotive industry which is now quickly working towards complying with BS VI norms, and the end-consumers as well as OEMs have become very selective about the selection of lubricants.

At Shell, we run extensive R & D programs which also include enabling OEMs to become more competitive in their respective areas by offering technical support and encourage them to work on value proposition models for their end consumers. Our technical team works very closely with the product planning for our lubricants factory to provide reliable solutions to the end users.

There is a continuous mutual cooperation between OEMs and Shell through long term sustainable partnerships programs like Shell LubeExperts and Shell LubeAdvisor to name a few, which have been designed specially to provide technical support to our OEMs. These programs provide great value to OEMs who are our customers and are expected to comply with the standards and specifications required by their end users.

How is Shell Lubricants helping the industry cater to the technical services in delivering energy efficiency and how Shell collaborates with OEMs to deliver technology-driven solutions?

Globally we work closely with many OEMs and we have more than 5000 OEM approvals. We aspire to build long term partnerships with OEMs and drive their profitability through our most effective solutions. Technology Leadership is a key lever for growth for Shell Lubricants. Our OEM partners and customers want to know that we understand and respond to industry trends and that we have leading products and technical services that bring value to their businesses, both now and in the future.

Driven by our technology, our aspiration is to be recognised as the undisputed leader in the Lubricants industry. For Shell Lubricants, Technology Leadership means excelling in three key areas - Innovation, Application, and Partnership - to bring value to our OEM partners and customers.

Innovationof new products and services, Application of products and services which add value to OEMs and customers, and Partnership with key industrial and B2B OEMs, Industry bodies and academic institutions are the pillars of our business. We have developed strong expertise in offering industrial solutions for gearboxes, turbines, wind applications and construction. We talk about the application based products that can be recommended by our OEMs to their customers to develop reliable products.

OEMs are very much capable in product design and offering technology solutions to their customers. Collaborating with the OEMS helps us in understanding the changing needs of their customers and identifying niche areas where we can innovate and eventually develop applications. These applications are eventually expected to offer a longer value proposition to the end-consumer.

Reliability is the mantra that we live by and continuously engage with our partners through technology workshops, seminars and webinars to update them on new technologies.

In lieu of sharp decline in oil prices, the Indian Government has cut down the fuel costs. Do you see such kind of move by the Government on the lubricants business as well?

Unlike commodity mainstream oil products, whose prices are closely correlated with movement of crude oil prices, base oil prices and lubricant are very less affected by crude oil price movements, nor these changes reflected immediately.

In my view, crude pricing will certainly have a minimal impact and not direct impact on the lubricants business, the reason being, that among several crude oil derivatives, we use the lube oil. The prices of lubricants are also different from that of base oil because it is not just about lubricants, there are many other ingredients / additives that it comprises. It is not mandatory that if price of crude falls, then the price of base oil will also fall. But looking at the larger picture, price fall can only be one of the factors that can affect the price of lubricants and not the only factor.

What are the plans of Shell Lubricants in Indian market in the near foreseeable future?

Shell Lubricants is amongst the frontrunners in the lubricants market globally and aims to be the largest international player in India. India is one of the largest markets with huge potential for automotive and industrial lubricants. At present, we have a large manufacturing facility located in Taloja near Mumbai and our aggregated total market share in India is at about 5 percent. However, the range of our market share varies across the sectors we play in. For example, in wind sector we enjoy a market share of about 48 percent. Therefore, it is highly dependent on the markets Shell Lubricants chooses to operate in, and where our strengths lie. Globally, our market share stands at 11.6%.

Technology will continue to be the key driver for growth of lubricants across all the industrial segments. In R & D space, we are constantly enhancing our capabilities in developing advanced lubricants that will significantly reduce the overall operational costs for the end consumers. Temperature at which lubricants operate and contamination levels are the deciding factors for performance of lubricants, which need to be considered while developing application specific products, and our research teams constantly work on improving performance of our existing products and developing new applications. We are committed on working more closely with our OEM partners and customers to enhance their experience and further add value propositions. In the next three years, we intend to significantly expand our product portfolio and increase our market share in the domestic market, while working in tandem with our OEMs.

As part of Shell Lubricants’ commitment to developing superior lubrication solutions, we work closely with our OEM partners to develop products to suit their future needs. This in turn broadens our understanding of future operational and equipment challenges, to provide technology solutions in developing advanced oils, which help customers get a competitive edge.