Kline News

LITTLE FALLS, NJ, January 29, 2007 – In a reversal of ExxonMobil’s ascendancy in 2005, Shell Oil Company has reclaimed the title of the largest global lubricants marketer for 2006. A newly proposed update to a study by Kline & Company is set to explore the effects of this development on the Chinese market and the world stage.

Shell, which had been supplanted by ExxonMobil in 2005 as the leading global marketer of automotive and industrial lubricants, was able to regain the top ranking via the September 2006 acquisition by Shell China Holdings B.V. of a 75% share in Beijing Tongyi Petroleum Chemical Company Ltd. and Xianyang Tongyi Petroleum Company Ltd., which together produce and market China’s leading independent lubricant brand.

“Shell’s and ExxonMobil’s market share in China was separated by only one percentage point in 2005, but with the acquisition, Shell has widened the gap to about four points. And because China is such a large market, the joint venture has put Shell back into the number one position globally,” says Geeta Agashe, director of the Petroleum & Energy practice for Kline’s research division.

The Chinese market for finished lubricants currently stands at 5.1 million metric tons, or about 13% of the global total, according to preliminary estimates from Kline’s BUSINESS OPPORTUNITIES AND THREATS IN THE DYNAMIC CHINESE LUBRICANTS MARKET, 2006-2011. PetroChina and Sinopec, the national oil companies (NOCs) of China, account for about 65% of the market share. Prior to Shell’s deal, the third leading company in China’s finished lubricants market was Beijing Tongyi.

In 2005, Shell held the number five position in China behind the two Chinese NOCs, Beijing Tongyi, and ExxonMobil. Shell’s majority stake in the number three company makes it the third-largest marketer of finished lubricants in China, with approximately 10% of the market share. Shell expects to be able to maintain both Shell and Beijing Tongyi brands in China.

In addition to bolstering Shell’s market share in China, the deal provides another critical advantage: increased access to distribution. Beijing Tongyi has approximately 2,000 distributors and 90,000 retailers for its products. Previously, Shell only had access to 350 distributors and 20,000 retail outlets.

“Beijing Tongyi, known to many as Monarch, was the only real significantly sized acquisition candidate in China. Certainly it was the only one that would have allowed Shell to make the market share move that they did,” says Bill Downey, vice president and head of Kline’s Petroleum & Energy consulting practice. “But we don’t think Shell made the move for global share. It was for the distribution network, which gives Shell access to a number of different regions within China that it didn’t have before, including some middle-tier cities that are the size of major metropolitan areas in the U.S. and Europe.”

“It’s a change in Shell’s position and a change in the overall competitive landscape, which is dominated today by China’s national oil companies. And this spells a big opportunity, given that the Chinese national lubes market will continue to grow by 7 to 10 percent over the next five years,” Downey adds.

BUSINESS OPPORTUNITIES AND THREATS IN THE DYNAMIC CHINESE LUBRICANTS MARKET, 2006-2011 will provide an in-depth analysis of commercial automotive, consumer automotive, and industrial lubricant products, markets, and suppliers. The report will be based on primary research conducted by Kline Asia’s Shanghai office. It is specifically designed to assist marketers and formulators of lubricants in understanding the market dynamics and in capitalizing on the developing business opportunities.

For more information on this study, go to www.klinegroup.com/reports/y584a.asp or contact Geeta Agasha at +1-973-435-3484. Those based in Europe should contact Erin Durham at +39-0331-976969. For information on the customized consulting capabilities of Kline’s Petroleum & Energy practice, contact Bill Downey at +1-973-435-3388.

Established in 1959, Kline & Company, Inc. (www.klinegroup.com) is an international management consulting and market research firm that offers a broad range of services to the petroleum and energy, chemicals and materials, consumer products, and life sciences industries.