Shell doubles capacity at Bekasi lubricant plant. Dutch oil company Shell is doubling the production capacity of Indonesia’s largest foreign-owned machine lubricant facility to capture a bigger slice of the domestic market.
The Hague-based multinational began construction on Thursday to expand its Marunda lubricant plant in Bekasi, West Java. The expansion, construction of which is slated to be finished by 2022, will increase facility production from 136,000 kiloliters each year to 300,000 kl.
Bekasi Lubricant Plant
Shell declined to mention the expansion’s investment value. The existing facility, the construction of which was completed in 2015, cost between US$150 million and $200 million.
Shell Global Commercial executive vice president Carlos Maurer told reporters in Bekasi that the expansion was a means of better capturing “Southeast Asia’s largest lubricant market.”
The Dutch company
The Dutch company is one of 44 companies, including the United States’s Exxon and Indonesia’s Pertamina, competing in the Indonesian lubricant market, where growth has been primarily driven by an increasing number of vehicles, particularly private cars and motorcycles.
Shells holds the second-strongest market presence in Indonesia after state-owned Pertamina, says a 2016 report by French market research firm Ipsos, but both companies have been facing increasing competition as rivals also consolidate their presence.
ExxonMobil acquired motorcycle lubricant producer PT Federal Karyatama in 2018 and Japan’s Idemitsu launched a second lubricant factory last year.
According to Industry Ministry data, Indonesia consumes 1.14 million kl of lubricant each year, 79 percent of which is domestically produced. Most of the locally-produced lubricant, 86 percent, goes into automotives while the remaining 14 percent goes into industrial applications.
Industry Ministry Director Feneral M. Khayam, who oversees domestic chemicals, pharmaceuticals and textiles industries, said going forward, his office wanted producers to yield more industrial than automotive lubes in accommodating industry growth.
“No more automotive lubes because we have enough of that,” he said, “This is to avoid a problem like that of cement – an oversupply.”
He was referring to the cement industry, which has been facing an oversupply since 2014, when local producers expanded production at the same time as foreign newcomers, mostly Chinese companies, entered the market. Demand struggled to keep up with production, such that cement factory utilization rates hovered above 60 percent since then.
Shell Indonesia president director Dian Andyasuri named the manufacturing and mining sectors as examples of lucrative industrial lubricant consumers going forward.
“I have seen that over the years, sectors pushing our demand growth are the same as those that push Indonesia’s economic growth,” she said.
The manufacturing sector grew 3.66 percent last year, while mining grew 0.94 percent, both of which are below the national average of 5.02 percent, Statistics Indonesia (BPS) data shows.
Dian went on to say that while Java remained Shell’s largest lubricant market, the company had also noticed growth on other major islands, namely Sumatra, Sulawesi and Kalimantan.
Offering an alternative perspective, Ipsos’ report paints the automotive lubricant-oriented strategy as a double-edged sword.
“While Thailand and Indonesia are established automotive hubs with an attractive market size, competition in the automotive lubricants segment is much stiffer as compared to the industrial counterpart,” the report reads. Shell doubles capacity at Bekasi lubricant plant (Norman Harsono, The Jakarta Post) Booming Indonesian Business Indonesia Online Expo China Indonesia Online Expo