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UAE based Naztech Petroleum Investment Group has put up USD 10 million capital to open the first oil lubricant plant in Ethiopia. Built in Galaan town in Oromia Regional State the plant produces lubricants and grease under Lubtam Lubricants brands. The plant has been built in technical collaboration with a UAE based company, German Mirror Lubricants and Greases FZE.
Capital’s Groum Abate sat down with the CEO of Naztech Nazir Ibrahem Omar to talk about Lubtam’s operations as well as possible oil exploration in Ethiopia
Capital: Tell us about the investment you made here
Nazar Ibraheim Omar: Naztech Petroleum Investment Group came to Ethiopia to establish an oil lubricant blending plant. It will blend and produce all types of lubricants and greases; that is to say grease for cars, trucks and other types of equipment as well as industrial lubricants for machines that produce sugar, cement and other products.
As you are aware for a long time Ethiopia was importing lubricants from overseas. We have brought the technology and knowledge about blending lubricants and making them. Most importantly we are producing them by following the highest standards of quality. In addition to establishing the blending plant we also developed a state of the art oil and lubricant laboratory.
Previously the public and private sector did not have access to this type of laboratory and as you can understand laboratories are very important in the quality of production. Now for the first time the Ethiopian government will be able to access the laboratory and test the quality of all lubricants. The investment is quiet sizable with almost 10 million USD for the first phase. There will be a second phase to establish a grease factory.
Capital: Where do you get the raw materials for your products?
Omar: The lubricant industry is very specific; we get the material from international refineries. For us, our commitment is to produce high quality lubricants and we are getting our materials from Exxon Mobil and additives from another American company called Afton.
In a nutshell, we are committed to producing high quality lubricants by bringing in superior raw materials.
Capital: Are there any lubricant companies in East Africa or Africa as a whole?
Omar: Absolutely, the market in Africa used to be dominated by the major four companies which are; Total, Agip, Shell and Mobil but now most of these companies have moved out except for Total. Independent blending companies like ours are taking over the market.
There are seven blending plants in Sudan alone and in Kenya there are two. Our target for establishing this plant here is, besides providing the products locally, also making them avialable to nearby countries at competitive prices.
Capital: What will be the capacity of the plant?
Omar: It will be more than the total demand of Ethiopia. So far, Ethiopia’s consumption is 35,000 tons per year. The factory produces, in two shifts, around 50,000 tons and we can always increase the capacity, and the factory size which is 10,000 square meters.
Capital: Are you confident that you will succeed despite competition from major players like Total?
Omar: Competition will always be there, it is a free market and the government encourages competition. We can give better prices and better services to our customers but we are also here to cooperate with them. For example all the other companies bring in readymade lubricants from the outside and we can blend their lubricants for them in our plant this is what I mean that we can become partners as well.
Capital: Do you have plans to invest in other areas?
Omar: Absolutely, we currently own two exploration blocks in Kenya and we built and established a Liquefied Petroleum Gas (LPG) distribution network in Mombasa. We are trying to invest almost 100 million USD over the next three years in LPG and LPG facilities in Djibouti and enhance the way it is transported from Djibouti to Ethiopia.
Capital: What about specifically in oil?
Omar: We have started doing studies but we do not have enough information. We already have two blocks in Kenya and we are now signing a contract for another block in Somalia. So it is natural for us to look at this market.
Capital: So you are interested in exploration in Ethiopia?
Omar: Yes, absolutely.
Capital: What are your hopes?
Omar: Our hopes are defined by the hopes of the Ethiopian government. The government is very ambitious. For the last ten years it kept an impressive double digit economic growth and that encourages us to work in partnership.
The government is doing very ambitious infrastructure projects; railways, roads and most importantly, the Renaissance Dam.
All this gives us hope and makes us comfortable and helps us to grow with the already growing Ethiopian economy.
I would like to add to that, that the level of corruption is near zero, the government does not tolerate it. This is very encouraging for investors like us because we are transparent, we are here with our own capital investment and I would like to add that we did not borrow a single dollar, it is our own cash and we will continue to invest our heart and money and when you do that you need to make sure your partners are clean and straight forward, and the government is like that. I have been working with them as an investment banker; I used to be an advisor to Meles Zenawi, we were overwhelmed with his vision, his plan for the economy of Ethiopia.
Capital: There have been rumors that oil has been found in Ethiopia. What can you say about that?
Omar: Well, I am a petrol millionaire, but for a petrol millionaire to speak about findings, one has to see figures. That means we have to do area testing and I am sure there is oil, in the Rift valley in Kenya they have discovered oil, in Uganda also they have discovered oil through Tullow, a company that is also in Ethiopia.
There is something that we call a geological basin. The geological basin extends to Ethiopia and I am sure there will be oil finds and natural gas finds. But we do need to have evidence and then we will move forward.
Capital: So you will be participating in oil exploration?
Omar: We are looking into it. Hopefully, beginning in September, after the holiday, we have offices in Dubai and London and most of the staff like the geological team will be going on holiday, after that we will start sending our team to meet the authorities and try to see what the available blocks there are, study them and try to engage into what we call a PSA agreement.
Capital: Have you faced a lot of challenges while investing here?
Omar: We have faced many problems but with the blessing of God and the support of the Ethiopian government we have overcome them.
Capital: What have been the main challenges?
Omar: It is all about logistics, it is all about time within the government entities, and we need to be careful about time because time is really critical for investors in getting a hands on reply in a timely manner. This is a serious issue and I’m sure they are aware of it and are working on it.
Capital: Any last comment?
Omar: I would like to take this opportunity to thank our Ethiopian government partner, the Ministry of Industry, in particular Dr. Mebratu, State Minister of Industry for his support as well as Ato Fitsum from the Investment Agency for all the cooperation at this time. We look forward to further cooperation from them because for one reason, we took the challenge, people were not interested in investing here in lubricants, and Ethiopia is a land locked country, which makes it more expensive for our export markets. So we need more incentive from the government regarding tax levies, tax holidays and customs holidays to enable us to be more competitive in the export market.
In local markets we are ready to compete. For the export, we need a better chance so, I hope the government will understand this and we are discussing these issues with them.