But as freight service on railways expands, the downside for the lubricants business could be reduced demand for heavy-duty motor oils for the thousands of trucks and buses now tasked with carrying goods and people throughout the region.

On the one side, there is the opportunity to supply the contractors carrying out the works during the life of the project, and then supply lubes and greases to run the trains. On the other, East Africa has always been dependent on buses transporting passengers and logistics companies transporting goods, Khan Kassam, managing director of Petrolube Kenya Ltd., told LubesnGreases.

The standard gauge railway is already reducing goods and passenger flow on trucks and buses, and this will only increase with time, he added.

Greasing the Wheels

The construction and operation of new rail lines, the rehabilitation of existing infrastructure and the acquisition of additional equipment will create some opportunities for the supply of more and effective lubrication products to reduce wear and friction, energy consumption and noise.

Railways require a range of greases for infrastructure such as trackside equipment, switch plates, overhead power systems and track mechanisms. Mobility lubricants are required for buffers, couplings, axels, wheel flanges, brakes and transmissions, as well as for the train engines. Many of these products are continually exposed to the weather and so need to be resistant to UV radiation, wash-out, heat and corrosion. Further challenges are maintaining grease intervals in remote areas.

The modern tracks and new equipment in East Africa also mean additional rail equipment, motors and rolling stock, which all require high-quality greases for optimum performance.

New East African rail investments include the completion and commissioning in May of the 472-kilometer standard gauge railway (SGR) linking Mombasa and Nairobi in Kenya. The U.S. $3.2 billion line was financed, built and operated by Chinese companies and is the first phase of a larger national network that includes the acquisition of 43 freight, five passenger and eight shunting diesel locomotives, 40 passenger coaches and 1,620 wagons, as well as rails and trackside equipment, all of which will require lubrication.

The project will place Kenya at the center of a network when it links Uganda, Rwanda, South Sudan and Ethiopia, creating opportunities for lube suppliers.

Neighboring Tanzania has opted to go electric with 2,561-km of Turkish and Portuguese-built standard gauge lines worth $3.1 billion linking Dar es Salaam with Morogo, Makutupora and later Mwanza on Lake Victoria.

The countrys lubricant market is dominated by Oryx Tanzania, Fuchs, General Oil, Mineral Oil and Lake Oil, according to Tanzanias Energy and Water Utilities Regulatory Authority. In 2016, its overall lubricant traded volumes increased by 8 percent to 36.2 million liters from 33.4 million liters in 2015.

Uganda is planning to spend $2.3 billion on a 273-km standard gauge line linking the capital Kampala to Malaba, a town on the border with Kenya, under a contract with China Harbour Engineering Co.

In Uganda, annual sales of lubricant and grease increased from 10.4 million metric tons in 2011 to 18.4 million tons in 2015, according to the Ministry of Energy and Minerals. The ministry could not say how much was used by the countrys railways, but even in markets with much more developed rail systems, rail lubricants account for only a small fraction of overall lube demand, Kassam indicated.

Network of Suppliers

Rail lubricant suppliers in the region include Petrolube (K) Ltd., the sole licensee for Fuchs Oil Middle East Ltd., which operates a lubricant manufacturing plant in Tanzania with yearly capacity to blend 22,000 metric tons of lubricants and 2,000 tons of greases. Fuchs is known for its specialty rail lubricants, such as the Renolin grease and Titan engine oil ranges. However, the supply volumes to rail operators in the region could not be immediately determined.

Vivo Energy is the licensed marketer in East Africa of Shell lubricants including GadusRail S2, a range of lithium soap wheel flange greases for railroad tracks, which can also be used in construction, mining and agricultural equipment.

Other oil marketers involved in supplying transport lubricants to the region include Total, Kenolkobil, National Oil Kenya and Gulf Energy, as well as smaller local and international manufacturers such as Whitmore from Texas and French specialty lubricants firm Condat, available in South Africa.

Wrong Side of the Tracks

Despite these large rail investments, the specialty lubricants market could be out of pocket after the governments of Kenya and Uganda terminated the 25-year concession to operate nearly 2,500 km of the Kenya-Uganda meter-gauge railway line by Rift Valley Railways (RVR) 13 years early, citing RVRs failure to maintain the track and rolling stock and pay its debts. By the end of 2016, RVR had accrued concession fees arrears of $3.8 million and $1.7 million in unpaid rent.

We needed to have fuel, lubricants and other consumables, RVR CEO Isaiah Okoth said, in defense of his companys lack of investment in infrastructure.

One of the leading fuel and lubricant suppliers to RVR was Hass Petroleum, which in 2014 contracted to deliver 100 million liters of diesel in Kenya and Uganda until the end of 2017. This was to meet the 65 percent increase in RVRs annual fuel consumption after the railway concessionaire added 25 more locomotives to its fleet.

Neither RVR nor Hass Petroleum, which is known for its Atroil diesel engine oils and Premium LX3 grease, responded to queries on whether they had an existing lube supply contract and what happens to these commitments with the termination of the Kenya-Uganda railway concession.

By the end of RVRs concessions, its freight traffic in Kenya had decreased by 9.3 percent from almost 1.56 million metric tons in 2015 to 1.43 million tons in 2016. In addition, the number of passenger journeys shrank by 7.3 percent from 2,359 in 2015 to 2,186 in 2016, according to Zachary Mwangi, director general of the Kenya Bureau of Statistics.

Further Woes

In a region where cargo and passengers mostly go by road, the new opportunities for rail lube suppliers are a disadvantage for heavy-duty engine oil marketers.

According to Tanzania Investment, for example, road accounts for more than 90 percent of passengers and 75 percent of freight traffic in the country.

The Tanzania-Zambia Railway Authority reported an increase in cargo volumes to 150,000 metric tons by June 2016 from the 88,000 tons in the same period the previous year after the governments of Tanzania and Zambia that jointly own the 1,860-km Cape gauge line linking the two countries injected an additional $36 million with the support of China. The authority is aiming for future loads totaling 380,000 tons, with an investment plan of at least $250 million on new locomotives, wagons, rehabilitation and maintenance works.

East Africa is dependent on buses and logistics companies transporting goods and rail is already reducing goods and passenger flow, and this will only increase with time, Petrolubes Kassam said.

One of our customers has seen a 30 percent fall already in the passengers they used to transport using their buses from Mombasa to Nairobi. Once the night shift of the SGR starts, their business will likely further decline, he said.