How to start Producing lubricating oil (lubricants)

Lubricants are produced from base oil. Base oil is one of the by-products of petroleum refinery. Petroleum products include premium motor spirit (PMS), Automotive Gas Oil (AGO) (diesel) Liquidified Petroleum Gas (LPG), Dual purpose kerosene (DPK), Bitumen, Asphalt, and low pour fuel oil (LPFO). Encouragement of investments to fully utilise petroleum products is seen as one of the ways of boosting the revenue accruing both to the private and public sectors of the economy. This project is a step in that direction.

Investment Justification

Raw materials for the production of Lubricants are readily available in Nigeria. Nigeria is known to be one of the forces to be reckoned with in crude oil production in the whole world producing an average of 1.16 million barrels of crude oil per day and having in its reserve over fifteen billion crude oil.

There are four refineries in the country with the latest at Alesa-Eleme near Port Harcourt, Rivers State with the capacity to refine 450,000 barrels of crude oil per day. Base oil which is a by-product of Petroleum refinery can readily by produced from these refineries. This guarantees regular supply of raw materials for this project.

Local and export markets exist for lubricants. Lubricants are being demanded by any industry be it large, medium or small-scale industry. Without lubricants, hitch-free operations by industries cannot be guaranteed. Lubricants are vital to the growth and development of any industry; the annual achievable capacity or even the daily production target of any firm cannot be met with the absence of lubricants.

Lubricants are also being demanded for by vehicle owners and motorcyclists for the purpose of lubricating and revitalising their engines. With the increasing number of vehicles and motorcycles in the country, it will not amount to an overstatement to say that a huge market exists for the production of lubricants in the country.

Another potential market for lubricants is the ECOWAS sub-region in which none of the present producers can meet the demand. Other potential markets are the North African countries such as Niger and Chad Republic.

This project can also be justified further by its viability. The profitability of the project is not in doubt as the invested fund can be paid back within two years of take-off.

Other benefits derivable from this project include income generation for its owners, optimal utilisation of our oil resources, employment generation the direct effect of this is the reduction in social vices like robbery, wandering, drug pushing and smuggling. These benefits contribute tremendously to economic and political stability which are desired goals of any economy.

Technical Information

Lubricants (otherwise known as engine oil) in general are categorised into three. They are light, medium and viscous oils depending on the chemical components. They are also demanded based on the category of users either small, medium or large industries depending on the capacities of their engines.

Production process involves procurement of base oil from refineries; the procured base oil is now filled into the blending plant after which additives such as detergents, anti-corrosive chemicals, dispersants are added. Heating and agitation simultaneously take place to achieve blending of the oil with the chemicals.

After blending, the product is allowed to cool down before being filled into various containers such as drums and kegs. Prospective investors can be assisted in terms of formation, production and sourcing of inputs including production machines.

This project can be self-financed by oil marketing companies desirous of expanding their present business activities. It can also be financed through term loan and overdraft facilities if supported by a well-prepared comprehensive and bankable feasibility report (This can be provided for serious minded investors).

Profitability

To produce a tonne of lubricants, it will cost a maximum of N40,000. With the present increase in the prices of petroleum products, a tonne will be sold at a minimum of N100,000. A gross profit of N60,000 per tonne is accruable. With a miniplant of 1 tonne per day working for 200 days, annual profit of N12 million is guaranteed from this investment.

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