Petrobras, Ultra Group and Braskem Purchase Ipiranga Group

In what is billed as one of the largest deals ever done in Brazil, Petrobras, the Ultra Group and Braskem reached an understanding last week to purchase Ipiranga. This $4 billion transaction moves Petrobras into a very commanding lead in the Brazilian lubricants market.

According to a 2007 market research study on the global base stock business by Petroleum Trends International (PTI), prior to this deal Petrobras was already the leading supplier of Brazil. Its sales of finished lubricants reached close to 70 million gallons, or 23% of the nearly 300 million gallons of lubricant consumed in Brazil in 2006. Although Chevron held a very respectable second place position with an estimated 17% market share, the Petrobras deal catapults it far ahead. As the third leading lubricant supplier in Brazil, Ipiranga will contribute close to 40 million gallon of lubricant sales to Petrobras bottom line. Petroleum Trends International says the result of this deals means Petrobras will command an estimated 37% market share in Brazil. Shell now moves into third place with roughly 10% market share, as shown in Figure 1. (click Figure for larger view)

To put this deal in further perspective, Petroleum Trends International’s base stock report shows that the Brazilian lubricants market represents an estimated 34.5% of the lubricant consumed in Latin America. Mexico is the second largest consumer at an estimated 26% of the regions total. So when you consider the combined volume of Petrobras and Ipiranga’s lubricant sales you are looking at Petrobras enjoying close to 12% of lubricant sales in Latin America. Now that’s a big deal.

Although representatives from both Pegasus Capital Advisors, L. P. and Universal Lubricants declined to comment on the details of the deal, the fact is Universal Lubricants has been acquired by Pegasus Capital Advisors, a private equity fund manager.

Founded in 1929, Universal Lubricants is a large independent lubricant manufacturer and distributor based in Wichita, Kansas. The company operates one manufacturing facility in Wichita, Kansas and has distribution centers in Kansas, Missouri, Nebraska and Texas.

In addition to its own brand of lubricants, Universal Lubricants, Inc. distributes major branded lubricating oil for Pennzoil-Quaker State, Shell and Castrol. The company is also engaged in reprocesses used oil for sale as an industrial fuel oil.

Pegasus Capital Advisors, L. P. is a private equity fund manager that focuses on middle market companies across a wide variety of industries. It's portfolio does not appear to currently include other lubricant companies.

Today’s new generation of stationary gas engines generally operate at high load and low emissions, placing increased stress on the lubricating oil. According to Shell, it's new Mysella XL extended drain gas engine oil has been specifically formulated to address these lubrication challenges and designed to extend oil life while helping to reduce maintenance costs and increase engine availability.

Shell says its Mysella XL extended drain gas engine oil significantly prolongs oil life relative to our regular drain gas engine oil by resisting oxidation, viscosity increase and the formation of harmful acids. In a field trial, the company reports that Shell Mysella XL gas engine oil also provided up to a 25% longer oil drain interval, compared to the leading competitor’s regular drain gas engine oil. “Maintenance intervals have been increased with the introduction of improved spark plugs, oil filtration and tighter control of the oil consumption rate,” says Dennis Woodley, Product Application Specialist for Shell Lubricants. “A high performance oil is required for synchronizing the oil drain interval with the engine maintenance interval. By using a high performance engine oil such as Shell Mysella XL, operators can help to extend maintenance intervals and minimize costs.”

Mysella XL reportedly helps keep pistons free of deposits and helps prolong the life of valves, valve seats and spark plugs. Additionally, Shell Mysella XL is compatible with engines equipped with emission catalytic converters and meets the requirements of Caterpillar and Waukesha regular service.

Shell Mysella XL extended drain gas engine oil was specially developed to help meet the needs of maintenance operators who service remote, un-manned engines (e.g., engines associated with oil and gas field operations). Extending the maintenance interval of these engines can help reduce labor, transportation, and service costs.

During their recent Annual Sales Conference in Las Vegas Lubrication Engineers Inc (L.E.) announced to their U.S. Sales Force some exciting changes to their Management team. After five very successful years as President, Randall L. Kressler announced his decision to retire with immediate effect and that his successor as President & CEO would be Scott Schwindaman. Jeff Turner is promoted to Scott's previous role as Executive Vice-President. Other notable promotions include Vincent Tofani as Vice President Sales, Darren Booth Vice President Manufacturing & Operations and Patrick Kraus as Vice President Administration & Treasurer.

Scott Schwindaman has been involved in the lubricant field for over 28 years. Prior to joining Lubrication Engineers in 1981 he worked for Southwest Petro-Chem. He is a graduate of Wichita State University with a BS in Industrial Technology. Scott's career to date has been in both production/operations as well as Research & Development of new lubricant products.

"Randy has done an outstanding job refocusing our company & establishing a strong foundation for the future. L.E.'s new management team is really looking forward to taking L.E. to the next level as the world's Lubrication Reliability Source. We have an excellent global team & strategy -- we aim to provide the very best service & reliability solutions to all our valued L.E. customers," said Scott Schwindaman, President, Lubrication Engineers Inc.

Randy will continue to serve L.E. on a part time consultancy basis regarding strategy for future corporate growth. L.E.'s successful new focus as the 'Lubrication Reliability Source" has resulted in a range of corporate partnerships with other Reliability based companies which allow L.E. Lubrication Consultants to provide customers with a high level of quality support that is often lacking from certain lubricant suppliers.

According to Ford, its switch from 5W-30 to 5W-20 has saved 700 million gallons of gasoline since 2001. The lighter grade reportedly delivers about a half mile per gallon increase in fuel economy per vehicle by reducing parasitic load and internal friction.

Ford says improved emissions is another advantage 5W-20 has over 5W-30. According to Ford, its use of 5W-20 has reduced carbon dioxide emissions by about one million metric tons a year. This is roughly equivalent to taking 180,000 cars off the road.

As a side bar, its it's interesting to note during Jobbers World's recently store checks it observed Ford's Motorcraft conventional and synthetic blend engine oil is priced the same at one of the leading autoparts chains. In both cases the products were priced at $2.59 a quart. Although this could be anomaly, it could also be a strategy that takes a page out of ConocoPhillips book. As readers may recall, ConocoPhillips made a splash last year when it announced it was offering synthetic blend PCEO at conventional engine oil prices.

STLE announced today that this year's STLE Annual Meeting & Exhibition in downtown Philadelphia, Pennsylvania offers a host of programs for those interested in gears, gear systems and gear lubrication, including:

- Sixteen technical papers covering such issues as surface treatments and their effects for gears, modifications of gear tooth tip design, additive response and gear oil formulation, as well as more theoretical papers on EHL modeling of gear contact and vapor-mist lubrication.

- Panel discussion: "Understanding Modern Gear Design & Lubrication Technology and Challenges." The panelists clearly are the thought leaders in the field. Hong Gao, ConocoPhillips, moderates the discussion. Panelists include Harold Chambers, Ford Motor Co.; Diann Hua, Caterpillar Inc.; Dave Degonia and Tze-Chi Jao, Afton Chemical; Jen-Lung Wang, RohMax USA; and Corey Phillips, ConnocoPhillips.

- The Basic Lubrication 102 course includes a segment on gears and their lubrication taught by John Hermann, ExxonMobil

- More than 70 exhibitors are showcasing their products and services, including the latest in gear lubricants, gear lubricant additives and gear testing procedures and equipment.

The conference date and location is May 6-10 at the downtown Philadelphia Marriott in Philadelphia, Pennsylvania.

Chemtool Inc., one of the largest independent manufacturers and custom formulators of lubricants and specialty products for industry worldwide, signed a lease last week to occupy nearly 140,000 square feet of a 1.3 million square foot warehouse space in Harvard Illinois. Prior to this expansion, in 2004 Chemtool purchased a 60,000 square foot facility in Elkorn Wisconsin. It also added capacity in 1997 with a facility in Milan Michigan and in 1998 with a new manufacturing facility in Tehachapi California.

Chemtool has also made two acquisitions in the last 10 years. It acquired Barrington Chemical in 1992. Barrington, based in Brighton Michigan, manufactured specialty cleaners and conversion coatings. That same year Chemtool also acquired Metalcote. Metalcote was a well recognized leader in specialty greases.

Chemtool is a privately held corporation founded in l963, and it’s a company clearly on the move. In addition to its business activity in the US, Chemtool also has a distribution facility in Diegem, Belgium where it ships to locations throughout Europe, Africa and the Middle East.

Chevron announced that it will add a new product to its lubricants lineup next month when it launches Delo Synthetic Gear Lubricant SAE 75W-90. According to Chevron, the new product meets all OEM warranty requirements and is suitable for use in rear axles and differentials for fleets in the commercial transportation and construction markets.

It is important to note that Delo Synthetic Gear Lubricant SAE 75W-90 also meets SHAES 256 Rev C. This is a new specification for Dana Spicer axles which will go into affect April 1, 2007. This new specification requires performance testing at -40º C and is designed to improve both low and high-temperature performance of gear oil.