News & Media releases
Shell acquires majority share in Tongyi, China’s leading independent lubricants company
22/09/2006
Shell China Holdings BV (Shell) has acquired a 75% share in Beijing Tongyi Petroleum Chemical Company Limited and Xianyang Tongyi Petroleum Chemical Company Limited, which produce and market Chinas leading independent lubricant brand.
The transaction makes Shell the leading international energy company marketing lubricants in China and gives it the third largest share of China’s rapidly growing lubricants market, currently estimated at over six billion litres a year. It also increases Shell’s global finished lubricants volume by 8% giving it approximately 16% of the global branded finished lubricants market.
The new lubricants joint ventures will market Tongyi’s brands and product lines separately from Shell lubricants brands under the existing Tongyi management team enabling growth in consumer mass-market and premium lubricants segments. Supply chain and other processes in China will be integrated between Shell and Tongyi.
David Pirret, Executive Vice President - Lubricants, Shell International, said: “China is the fastest growing consumer lubricants market in the world, forecast to grow annually by 10% at least until 2010. Shell is the world’s leading lubricants brand. Growing our business in such an important market is critical to extending that leadership. It is also in line with Shell’s strategy of profitable downstream through leveraging our portfolio in high growth markets.
“Both Tongyi and Shell have been expanding in China and this acquisition strengthens both brands’ growth platform. At the same time, Shell can realise synergies in the manufacture of lubricants and procurement of base oils, additives and other materials so increasing efficiency and improving our service to customers. Tongyi also has access to our cutting-edge technology.”
Huo Zhenxiang, Vice Chairman of the new joint venture and former Chairman of Tongyi, said: “Tongyi has demonstrated outstanding enterprise in its 13-year history and has grown rapidly to become China’s third largest lubricants company with strong sales growth in the last three years. Our scale means that we are now in the top 20 lubricants marketing companies globally. To continue to compete effectively we needed to achieve a step change in our brand and market development against the international competition we face.
“Our alliance with Shell sets the conditions for the Tongyi brand’s sustainable growth in China, assures distributors and suppliers of better business and provides our hard-working staff with better opportunities for growth. This will also ensure a greater contribution to the local economy and Chinese society.”
Tongyi’s brand and products lines are complementary to Shell’s with a range of lubricants for cars, motorcycles, heavy-duty engines and industrial customers sold through a network of 2,000 distributors and 90,000 retailers across the country. Tongyi has three lube oil blending plants in China with a total annual capacity of 600,000 tons.
Shell is China’s preferred lubricants brand according to independent surveys with sales experiencing strong growth over the past few years. Shell has three lube oil blending plants in China with a total capacity of about 200,000 tons per year.
Commenting on the importance of the deal to Shell in China, Lim Haw-Kuang, Executive Chairman of Shell Companies in China, said: “Taking a major stake in a successful Chinese company is a clear demonstration of Shell’s ability to deliver on its strategic growth aspirations in the East and positions us as one of the leading international energy companies operating in China today. It means we bring more top Chinese talent into Shell and further demonstrates our commitment to China.”