Repsol, United Global Form JV

Spains Repsol will begin blending lubricants in Southeast Asia through a joint venture with United Global Ltd., after acquiring a 40 percent stake in its Singapore-based lubricant manufacturer United Oil Co., the companies announced on Sept. 30.

The share purchase agreement signed on that day includes an initial cash payment of U.S. $36.5 million and provisions for an additional $10 million if certain goals for the 2023 financial year are met, United Global Ltd. said in its press release.

Pending approvals and fulfillment of agreed conditions, the companies expect to complete the agreement by the end of 2019.

United Oil has two lubricant plants, one in Singapore and another in Indonesia, with combined annual production capacity of 140,000 metric tons. The Indonesian plant is operated by subsidiary PT Pacific Lubritama and currently has capacity of 80,000 tons per year. The joint venture will manufacture and supply Repsol brand lubricants in Singapore, Indonesia, Malaysia and Vietnam.

The deal represents a third manufacturing hub for Repsol. The company already has one each in Spain and Mexico.

Our investment plans in Indonesia are to upgrade the existing facilities [of United Oil], to improve its automation, flexibility and also to increase additive and base oil storage capacity. Our aim is to offer a comprehensive product portfolio to our customers, and we will be able to adapt to current and future market needs, a Repsol spokesperson told Lube Report.

Southeast Asia [countries], particularly Indonesia, are key target markets for growth, fitting in with the [companys] Strategic Plan 2018 to 2020 goals to increase the international expansion of the downstream unit. Repsol aims to be a top-five player in Indonesia through the capabilities incorporated in this partnership, Repsol stated in its press release.

Our respective brands and products complement one another and provide a comprehensive portfolio for our customers, United Global CEO Jacky Tan told Lube Report.

Asked about a recent downgrade of Association of Southeast Asian Nations markets by consulting firm LMC Automotive, Tan said the new partners remain positive about prospects in the region. Both Repsol and United Oil see ample room for growth in Southeast Asia despite of what is going on in the macro environment, he said.

Citing economic uncertainties, LMC Automotive downgraded its forecast of motor vehicles sales for the region, predicting drops of 1 percent this year for passenger vehicles and 2 percent for light commercial vehicles, with the principal drag being sluggish sales in the Indonesian market.

Repsol allocated 1.5 billion (U.S. $1.7 billion) for investments from 2018 to 2020 to expand its downstream unit, including it fuel retail, petrochemicals and lubricants businesses. Last year the company purchased a 40 percent stake in lubricant distributor Bardahl de Mexico to manufacture and sell its brand of lubricants in Mexico. Repsol aims to double its lubricant sales to 300,000 tons, increasing the share of sales outside of Spain from 46 percent to 70 percent.

Last October, Repsol and United Global entered into a non-binding memorandum of understanding to explore the possibility of an acquisition of United Oil, which is an independent lubricant manufacturer with its brand of United Oil for automotive, industrial and marine lubricants.