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February 20, 2019

Volume 3 Issue 4

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Big Oil's Shrinking Share in Andes Region

Except for Venezuela, lubricant demand in South America’s Andes region has been growing in recent years, and the biggest beneficiaries have been local suppliers and second-tier foreign marketers. Big international oil majors have lost significant market share for a variety of reasons, including their own pullbacks and the entry of new suppliers.

The study estimated the change from 2009 to 2018 in breakdowns of market shares of leading suppliers Chile, Peru, Ecuador, Colombia and Venezuela. Venezuela, where the combined lubricant market share held by multinational oil companies fell by 21 percent, may be an anomaly because of its economic and political crises, But big oil companies also lost a combined 26 percent of market share in Colombia, 16 percent in both Ecuador and Peru and 10 percent in Chile, Entoro estimated.

Shell, BP Castrol and Chevron lost the greatest market shares. Shell and Castrol’s pieces of pie shrank in all five markets. Shell’s Pennzoil brand, which was shown separate from the rest of the parent company’s business, did more than double its market share in Peru but lost significant ground in Chile and Venezuela. Chevron and its Texaco brand gained market share in Chile but receded in Peru, Ecuador and Colombia. ExxonMobil was the one large oil major that bucked the trend as it generally held steady and in some cases increased its share, according to Entoro’s estimates.

Shell, BP and Chevron did not respond to requests for comment or said they were unable to.

Entoro Managing Partner Mark McHugh, who discussed the study at the ICIS Pan American Base Oils & Lubricant Conference in New Jersey in December, cited several reasons for the shifts. Castrol pulled withdrew from the industrial lubes segment in part of the region, he said, and adopted more of an OEM-focused strategy in its automotive business. The latter decision resulted in the loss of some business-to-consumer business, he said.

McHugh noted that Chevron signed SKC as its licensed lubricant distributor in Chile and that ExxonMobil did the same with Copec in both Chile and Colombia. Copec acquired Colombia's Terpel during the study period, posting an increase in market share in that country.

New players such as Brazil's Petronas and Puma – a subsidiary of Dutch oil trading company Trafegura – have made their way into Colombia and are eyeing expansion in the Andes region. Several other companies, including Valvoline, Venoco and YPF, were already in some Andean markets and still are.  

Two of the region's largest multinational vehicle leasing companies, Arval-Relsa and ALD Automotive, explained that the selection of motor oil brands in Latin America usually fall in the hands of the automakers themselves and not leasing companies, which play a larger role, for example, in European countries.

"The only case where leasing companies could negotiate brand usage is in Peru and Chile where some leasing companies have their own repair shops," ALD Key Account Manager Sergio Lecua told Lube Report.

In Peru, Arval-Relsa actually had its own garage facilities until 2018, and the motor oil used at the time was Valvoline, according to marketing and communication analyst Ruth Ibarra.

"It had great quality and good value for money. However, we have decided to outsource our garage service in order to improve our profitability and align ourselves with the other Arval countries," Ibarra said.

However, nowadays, Arval-Relsa does not have control over what brand to use. Dealers and suppliers use motor oil that fulfills the specifications of the vehicle manufacturer's manual and the brand of motor oil differs from each dealer, Ibarra added.

In Chile, the choice of oil is mainly decided by the car brands today as Arval-Relsa started outsourcing garages services in the country about five years ago.

“When we were running our own shops, we initially started with the Shell brand and then changed to Copec [ExxonMobil]. The change was mainly due to the more economical offer that was given to us," head of marketing and external communications Pamela Veas said during a phone interview.