‘SK Lubricants signed a 49% of equity purchase agreement with Mekong, Vietnam’s largest private lubricants company’

On February 9, SK Innovation announced its subsidiary SK Lubricants signed an agreement to acquire 49% of stakes in Mekong Petrochemical, Vietnam’s largest private lubricants enterprise, with 30 officials of both companies including CEO of SK Lubricants, Cha Gyu-tak, and Chairman of Mekong, Hoang Le being present on February 7.

SK Innovation explained that SK Lubricants has already been operating joint production facilities at home and abroad through global partnering but it is the first time for the company to make an equity investment in an overseas lubricants company.

With 6.3% of share ^(*) in the Vietnamese lubricants market as of 2018, Mekong owns 7 affiliates related to lubricants business including 2 tank terminals, a lubricants manufacturing plant and a logistics center as well as 12 dealers and sales affiliates across Vietnam. The company also plans to turn its affiliates into its own subsidiaries to expand the lubricant business in the future.

(*)Vietnam’s lubricants market is dominated by three global majors – BP Castrol, Shell and Chevron, without any local player that has more than 10% of the market share. Mekong is the only Vietnamese lubricants company that is growing, with its market share increase from 4.3% in 2012 to 6.3% in 2018.

“Based on Mekong’s production and sales infrastructure combined with SK Lubricants’ SK ZIC brand awareness and technological prowess, we hope to quickly expand in the country’s premium lubricants market as well as in the entire ASEAN market,” stated CEO of SK Lubricants Cha Gyu-tak, at the signing ceremony. Hoang Le, Chairman of Mekong, said, “It is my pleasure that we could create a cooperative model based on mutual trust between the two companies, and I look forward to the future of this business model, which will allow both companies to grow together.”

SK Innovation added that the agreement was reached under mutual understanding between both companies. Mekong has sought to increase the market share of the premium lubricants in Vietnam through its local sales network, while the Korean energy company has executed the BM (Business Model) innovation aiming to establish a reliable supply chain through innovating the model that used to focus on export.

Following this deal, Mekong will sell lubricant products imported from SK Lubricants in Vietnam market through its domestic sales network, and also manufacture and sell base oils exported by SK Lubricants. Additionally, the two companies plan to ramp up storage facilities, replace old facilities, and bolster the sales network in an attempt to improve the existing local infrastructure and expand business not only in Vietnam but across Southeast Asia.

SK Lubricants is the world’s largest supplier of Group III base oil. Through its global standard premium lubricants and its excellent R&D capability, the company has been pursuing various global partnerships, including Southeast Asia countries with high growth potential such as Vietnam, Philippines and Thailand.

The equity acquisition will also bring SK Lubricants an end-to-end value chain of the lubricants business in Vietnam encompassing production, storage, distribution, and sales across the country. Accordingly, the company will be able to get a foothold in the ASEAN’s lubricants market. Besides, SK Lubricants has already been cooperating with other global partners such as JX Energy of Japan, PT Pertamina of Indonesia, and Repsol of Spain and operating joint ventures with them in Ulsan, Indonesia, and Spain respectively.

Vietnam’s lubricants market is expected to nearly double from 3.5 million barrels in 2019 to 6.4 million barrels in 2028. The increase of national income, along with accelerating availability of passenger cars and commercial vehicles also leads to a rapidly rising demand for premium lubricants. Despite such a market situation, the Vietnamese lubricants market has been dominated by global major companies, while a local company with competitiveness is rarely found.

Lim Su-gil, Head of PR office at SK Innovation, said, “All subsidiaries of SK Innovation are pursuing innovation to keep our customers happy through an innovative business model centering around Green, Technology and Global.” He added, “The agreement with Mekong will write a success story where SK Lubricants grows together with its partner by taking advantage of the world-class lubricants business know-hows.”

[Photos]

(Photo 1) CEO of SK Lubricants Cha Gyu-tak (fourth from the left) and Chairman of Mekong Hoang Le (third from the left) shakes hands at the signing ceremony.
(Photo 2) CEO of SK Lubricants Cha Gyu-tak (third from the left) and officials of SK Lubricants take a tour around Mekong’s production and storage facilities.