Russia vs. The Imports

In 2013, Russian-made additives accounted for 64 percent of overall additive consumption in the country, while imported products accounted for 36 percent, according to InfoTek. However, Russian lube makers use only imported additives to produce their top-tier lubricants used in newer passenger cars, light commercial vehicles, trucks and imported industrial machinery.

Russia is home to several additives producers with Rosneft, LLK-Naftan and Qualitet leading the industry. At its Novokuybishevsk refinery, state oil giant Rosneft produces the bulk of Russias additives, and most are used in domestically made machinery and Russian cars that comply with outdated GOST standards. Last
year, the company held 26.2 percent of the countrys domestic additive production.

LLK-Naftan is a joint venture between Russias largest lube marketer LLK-International and Belarus oil producer Naftan. In 2013, it held a 25.4 percent share of the countrys domestic additive production. Moscow-based Qualitet, an independent chemicals and specialties manufacturer, held 19.1 percent of domestic production. Rounding out the market are Gazprom Nefts Omsk lubricants complex that held 8.5 percent of the countrys production last year, Ufa-based PromEko (8.2 percent) and Maks-NN, an engine oils and additives producer from the city of Dzerzhinsky, (6.6 percent). Several small companies account for the rest.

In terms of volume, Russian lube manufacturers consumed around 19,000 tons of imported additives in 2013. The bulk of these, or 15,000 to 16,000 tons, was used by Russias largest lube manufacturers to produce high-quality automotive and industrial lubricants, Sobolev said.

InfoTek found that Lukoil was the largest consumer of imported additives last year. It held a 40 percent share of total imported consumption. It was followed by Rosneft (23 percent), Gazprom Neft (18 percent) and Bashneft (1 percent).

In 2013, about 97 percent of Russian-made additives packages were used in motor oil formulations and just 3 percent went into transmission oils. In contrast, 80 percent of imported additive packages went into motor oils, 14 percent into transmission oils and 6 percent into industrial oils. What this shows is that owners of new industrial equipment and machinery need to follow original equipment manufacturers recommendations by using high-quality oils, Sobolev said. At the moment, such oils cannot be manufactured with domestic additives.

Trying to Catch Up

Russian additives makers are well behind global suppliers in terms of quality and cannot compete with importers, according to InfoTek. Soviet economic planners decided to support additives production at every refinery built since the 1950s and 1960s that also produced lubricants. Of course, additive production was only a tiny fraction of the business for these refiners, Sobolev said. They were focused mostly on producing petrochemicals such as fuels, bitumen or fuel oil. Nobody really paid attention to the development of their own additive packages, and every refiner was able to offer only one additive component.

Later, many additive production departments were closed. Those that remain are in Omsk, Novokuybishevsk and Novopolotsk (Belarus). Meanwhile, in the 1990s and 2000s, a few private companies appeared, but they dont really have the expertise and knowledge to compete with the importers, Sobolev said.

The Soviet experience taught us that additive production should operate in its own facilities unrelated to the vertically integrated oil companies, and it must have its own team of specialists. In short, it has to be independent, he contended.

InfoTek also found that the biggest importer of additives in Russia is Infineum, which accounted for almost 40 percent of total imported volume in 2013. It was followed by Lubrizol with nearly 28 percent share, Afton at 16 percent and Evonik with 12 percent.

Russia exports significantly lower volumes of additives than it consumes. Exports are slumping, amounting to 2,500 tons last year. These are simple, primitive assortments of additives or additive packages used in low-quality oils in GOST applications by customers in neighboring countries, Sobolev said.

The largest volume of exported additive packages is meant for motor oils (1,400 tons) and transmission oils (100 tons). The rest of the exports are detergents (500 tons), antioxidants (300 tons), thickeners and pour point depressants (100 tons each).

Bleak Future

In summary, the Russian additives market has not modernized, and in the face of changing emissions regulations and new motor oil specifications, it cannot be self-sufficient. The market is highly import orientated and depends on the additive formulations and approvals that come with packages from foreign additive makers. Finally, according to InfoTek, Russian additive exports are minuscule compared to imports.

According to InfoTek, potential additive consumption in Russia could be as high as 90,000 t/y if we also include additives blended into imported finished lubricants, a volume that reached around 500,000 tons last year. The real value of additives is shown when we compare their market price to crude oil prices, Sobolev stated. He proposed that the cost of one ton of additives equals the cost of eight tons of crude oil. This tells us that additive production can be a real gold mine if we possess the right technology and knowledge.