The lubricant sub-sector of the downstream industry is one with huge potential capable of being a major source of revenue for the country but regrettably, that sector has been neglected over the years leaving room for the influx of substandard lubricants into the country.
Principal Partner, Lube Services Associates, Kayode Sote, for instance, said at a recent summit that statistics available confirm that Nigeria is the third largest consumer of lubricating oils in Africa, adding that there are 32 registered and other illegal blending plants with a total installed capacity of about 965 million litres per annum. Regretably, they are currently producing at an average of 40 per cent of their total installed capacity.
He alluded to the fact that the industry employs over 5,000 Nigerian workers with potential to generate over 50,000 additional jobs if the plants are working at full installed capacities.
Regrettably, the industry has been unable to achieve a quarter of its potential due to some challenges militating against its growth, a development that has left it in the hands of charlatans.
But despite these shortcomings, there are opportunities that abound in the lubricants sector, capable of addressing the scourge of unemployment while guaranteeing maximum returns on investments.
Base oil, which forms 85 per cent of raw materials for lubricant production, is one of the products of crude oil. Curiously, the base oil cracking unit of the Kaduna Refinery is reported to have been abandoned for 22 years.
The Nigerian National Petroleum Corporation (NNPC) had confirmed that the unit was not fixed for two decades after it developed fault in 1996, assuring that efforts are on to put it back to life.
Group General Manager, Group Public Affairs Division of the corporation, Mr. Ndu Ughamadu, said that fixing of the base oil cracking unit would be included in the second phase of efforts by the Corporation on refinery rehabilitation.
The Kaduna Refinery is the only facility in Nigeria built with capacity to break base/lube oil, the major ingredient for the production of lubricants. This development has forced Nigeria’s lubricant market into a sorry state of total dependence on importation of base oil from refineries abroad.
Nigeria, Africa’s biggest oil producer, imports base oil worth N250 billion annually, Lubricants Stakeholders Technical Committee (LSTC) said.
The group also stated that Nigerians lose N180 billion to repair their vehicles and machines annually due to use of unrefined and adulterated oil. There are also indications that the country might have lost over N22 billion to the abandonment of the Kaduna Refinery.
Sote explained that there is no gainsaying the fact that a major problem faced by engineers through the years has been the challenge of preventing and/or minimising the estimated loss of about 33 per cent of the useful energy generated in the industry due to friction.
‘‘However, the correct selection and application of lubricants and their interface with appropriate lubrication of machine elements are directly related to the quality of the products and their performance standards.
The need to blend and market quality lubricants is therefore sacrosanct and a necessary perquisite to ensure optimal plant efficiency, energy saving and overall cost-effective maintenance of machinery in industry,’’ he maintained.
The lubricants engineer disclosed further that the new global order is knowledge economy and any country that is not knowledge-driven or unwilling to join the bandwagon risks being behind with adverse consequences for its economy and people.
Nigeria, he said, must add value to its natural resources through the application of knowledge because market for such free endowment may shrink, business may collapse but its citizens must not perish because of lack of knowledge and will-power of the government to promote knowledge revolution in all its ramifications.
Statistics available confirms that the total world demand for lubricating oils is about 50 billion litres 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 600 million litres (1 per cent of the world’s total demand), with a gross earning of N150 billion in 2013.
The cumulative assets base of the blending plants is about N20 billion, generating about N45 billion profit margins in 2013.
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 specialised products imported by marketing companies into the country.
All formulations and specifications of products to be manufactured should be forwarded to the Standards Organisation 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). Further guidelines on the licensing procedure are available on DPR’s website: www.dpr.gov.ng and www.son.gov.ng.
According to a pre-feasibility report on small scale lube oil blending plant prepared by Young Oliki, the best lubricants plant is not the one with lowest cost but the one with the best ability to manage complexity.
Oliki, in using a case study for a blending plant that will be producing smaller economic sizes of 1 litre can of 700 packs daily and 210,000 packs annually amounting to 210,000 litres per annum, explained that the plant will have an installed capacity of 300,000 litres of lube in a year.
He explained that the raw materials’ usage for this plant is in the paraffinic base oil grade and essential additives, adding that the paraffinic base oil grade is the most used in lube production.
He stated that base stock is not sufficiently produced in Nigeria, hence, the need to substitute with importation from overseas.
Lube blending machine, oil filling machine, cap screwing machine, conveyor, farm tank with total of 20,000 litres, standby generator, small delivery van, interconnecting pipelines and finance.
The plant will cost about N8 million excluding land, but including machinery, generator and working capital requirement, which includes base oil stock.
Base oil stock contains about 40 per cent of the total plant cost. Reduction of raw materials’ storage would bring down the cost of start-up. Profit before tax is projected for about N17 million in the first year.