Lub-rref plans big to build lubricant industry linkages

Highlights

Lub-rref Bangladesh 

• Lubricant recycling pioneer in the country 
• Caters to 8% of annual market demand
• Plans to occupy 20% of market by 2025
• Tk150cr IPO to modernise recycling, pay off costly loans  
• Aims at higher-end products and increased profitability 

Julda industrial theme park 

• 16 acres own land by River Karnaphuli  
• Tk1,500 crore investment project 
• Project accomplishment target by 2023
• Own jetty and 100,000 tonne tank terminal 
• 70,000 tonne annual capacity virgin base oil refinery 
• 1,000 cubic metre/hour hydrogen production to run refinery 
• Refinery's byproduct to run bitumen plant with 15,000 tonnes raw material 

Lub-rref (Bangladesh) Limited, the country's lubricant recycling pioneer, plans on modernising its existing lubricant recycling and manufacturing plant at Chattogram with public investors' money to cope with market dynamics.

During a recent visit by a group of journalists to the home-grown company, high officials of the organisation revealed an even bigger plan to build the firm's own industrial complex by the River Karnaphuli.

The project will include a jetty, a tank terminal, a modern base oil refinery, a hydrogen plant and a specialised bitumen plant.

"The new industrial complex will help us have a manufacturing ecosystem where a unit will supply another one's raw material with its by-products and work as each other's forward or backward linkages to offer the company a great convenience in sourcing and selling," said Naim Siddiki, head of operations of Lub-rref.

During the visit, this correspondent was informed that the company, already having all the necessary approval for the four projects at the same riverside site, has 16 acres of land there and is planning to add more if possible.

The company will build its own jetty that will enable it to use the river for transporting bulk raw materials and finished products.

The planned complex, namely Julda Industrial Theme Park, will have a tank terminal with a storage capacity of 100,000 tonnes and will help the company mitigate the impacts of international commodity market volatilities. 

The entire industrial park is a Tk1,500 crore project and is planned to reach completion in 2023. The company will bear 20% of the cost from its equity. It is now in talks with both local and foreign lenders to arrange finance to meet the remaining cost of the project, according to Mofijur Rahaman, chief financial officer of Lub-rref.

Under the plan, the company will invest Tk400 crore to build the country's first base-oil refinery with an annual capacity of 70,000 tonnes.

It will enable the company to produce group-2 base oil mainly from imported virgin petrochemical raw material and this will be a great boost for the company that is currently yielding group-1 base oil for lubricants.

"Demand for higher quality lubricant oils is increasing and we are entering into technical collaboration and support agreements with some of the world's best lubricant technology companies," said Naim Siddiki.

The refinery will refine 55,000 tonnes of group-2 base oil annually, while the company itself is likely to consume around 30,000 tonnes in 2025 as it wants to grab 20% of the 2025 estimated local market volume of 1.6 lakh tonnes, up from the current 8% of the 1.2 lakh tonne market, said the CFO.

The remaining base oil will be sold to other brands at home and abroad.

We are conducting research to yield high quality specialised bitumen that would be best for our roads in the given weather

The base oil refinery will need hydrogen gas for hydro fractionation of base oil material and the planned hydrogen plant will cater it. The hydrogen plant may also have surplus as it will have a capacity to produce 1,000 cubic meter of the gas each hour.

The refinery will produce 15,000 tonnes of waste or by-products each year, which is a raw material for specialised bitumen.

"We are conducting research to yield high quality specialised bitumen that would be best for our roads in the given weather," said the operations head.

Adding externally sourced raw material to the ones from its own refinery, the bitumen plant can produce 30,000 tonnes of bitumen a year.

The company

Lub-rref began commercial operations in 2006, following its inception in 2001, to launch a local brand in the market blind in favour of global brands.

However, its legacy in lubricant technology goes back to the 1970s when its founder Mohammed Yousuf, popularly known as Professor Yousuf, began Grease House Ltd, the country's first lubricating grease manufacturer.

"We, at the time, began lubricant recycling to supply grease to hungry local industries and also the state-owned petroleum marketers," he recalled the old days while talking to reporters at the company's plant at Chattogram BSCIC Industrial Estate.

The economics and law graduate along with his technical colleagues has travelled the world, attended industry trainings and entered into technological collaboration initiatives to learn lubricant technology. 

Yousuf also was into the joint venture project with FUCHS Petro-Lub, AG, Germany and the plant is still operating just beside the existing Lub-rref plant. He opted out with a dream of positioning his home-grown lubricant brand "BNO" in a market flooded with foreign brands.

He began recycling used oil mainly because the government back then did not allow private sector players to import or export any petrochemical material.

But having travelled the world over a few decades he and his company learned how much the increasingly eco-conscious world cares about lubricant recycling.

"Recycling is a responsible mode of lubricant production that helps save resources and, more importantly, minimizes the harm to the environment," said Lub-rref Managing Director Yousuf.

"We decidedly have been increasing our investment for quality recycling of lubricant oil and yielding the best one in the country. But unfortunately, in Bangladesh some of our competitors have long been trying to portray our products as something from wastage. It needs awareness to help the environment."

Recycled motor oils are contributing 62% of Lub-reff current annual sales of around 10,000 tonnes of lubricants.

It also blends lubricants for a wide range of users out of imported base oil and additives.

Lub-reff's state of the art lubricant testing laboratory is also a bold investment for a facility that saves foreign currency not only for the country, but also for the industry and some other stakeholders.

Tk150 crore IPO

The Bangladesh Securities and Exchange Commission (BSEC) has given its nod to Lub-rref Bangladesh to go ahead with its initial public offering (IPO) plan to collect Tk150 crore from investors.

The company will modernise its existing plant with most of the IPO funds alongside paying some of its expensive bank loans.

The group-1 base oil recycling plant with an annual capacity of 8,440 tonnes now can be technologically upgraded in a way that will enable the company to produce higher quality oils and enjoy a better price and attract new users, said Lub-rref operations head Naim Siddiki.

CFO Mofijur Rahman estimated that the modernisation of the existing plant alone will boost the company's revenue by 60-70% and help increase its profit by 20% at least.