The Future of Lubricant Oil Supply in Australia: Trends and Innovations to Watch

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Australia's lubricants market has undergone significant change over the past decade, shaped by factors like the decline in local crude oil production, growth in import reliance, industry consolidation, and sustainability concerns.

As the market continues to evolve in response to local and global forces, new trends and innovative solutions are emerging that could reshape lubricant supply and demand dynamics within Australia over the coming years.

Declining Domestic Production and Growing Import Reliance

notable decline in domestic crude oil production

 from inland and offshore fields over the past ten years. Local crude oil production fell around 30 percent from 2000-2018 and several major fields like Bass Strait are slated for decommissioning by 2025. This production decline has increased Australia's reliance on imported crude and lubricant base oils. Approximately 90 percent of refined lubricants now sold in Australia are either imported or produced domestically from imported base oils and additives.

Industry experts forecast Australian lubricant base oil imports reaching around 450,000 metric tons per year by 2025 as local refineries close and production declines. To secure future supplies, Australian blenders and marketers are strengthening connections with major Asian base oil exporters in South Korea, Taiwan, India, and Singapore. Partnerships with producers across southeast Asia will hedge Australia's growing import exposure.

Consolidation Among Australian Lubricant Firms

There has been increased merger and acquisition activity between Australian lubricant companies over the past decade, driving consolidation. Local firms like 

 and Mobil have purchased numerous smaller distributors and blending plants across Australia. Further consolidation is expected as incumbent brands acquire competitors to bolster market share and achieve economies of scale based on production and distribution efficiency.

Australian lubricant firm Caltex Australia has maintained the largest market share at around 25 percent but could face tougher competition as larger global brands enter Australia. Expansion across Australian states and into higher growth industrial segments like mining will be a priority for major lubricant firms seeking to solidify domestic market positions this decade.

Premium and High-Performance Products Driving Value Growth

Although Australia's lubricants market remains flat in terms of lubricant volume demand, its total value has grown at over 3 percent annually from 2015-2020. This growth is attributed to consumers' shifting preference towards higher-tier finished lubricants that promise greater efficiency, longer service intervals, and compatibility with modern engines. Australian lubricant producers are innovating more premium synthetic, semi-synthetic and high-performance lubricant products in line with this trend.

Research by Freedonia predicts such premium lubricants could account for 50 percent of Australian lubricant demand by 2025 compared to 40 percent in 2018. Locally blended premium products are also perceived as more reliable than standard imported lubricants by major OEMs and mining companies. This presents an opportunity for Australian blenders to supply high-value products to domestic industrial consumers.

Sustainability Concerns and Circular Economy Solutions

Sustainability is becoming a key priority across Australia's lube market supply chain in line with global trends and pressure from OEMs as well as industrial and retail consumers. Lubricant lifecycle management is garnering more interest from major cities, miners, marine transport, and fleet operators across the country looking to comply with emissions regulations, optimize total lubrication-related costs, and bolster CSR initiatives.

Used oil collection for re-refining and reconditioning has expanded dramatically over the past 5 years within Australia and rates are expected to grow 6 percent year-on-year through 2025. New refining plants are also slated to come online this decade to convert used lubricants into Group II+/Group III base oils. Local re-refiners, 

, and service providers are collaborating on economical collection systems leveraging storage hubs and reverse logistics. These partnerships aim to make Australia's circular lubricants economy more efficient.

Innovations in re-refining technology, bio-based lubricants, synthetic lubricant production methods and lubricant performance monitoring also present opportunities for Australian firms to develop globally relevant solutions that support sustainability and the circular economy.

Several market segments are poised for relatively stronger growth in lubricant demand through 2030, presenting key targets for Australian lubricant suppliers.

Mining represents Australia's largest lubricant end-use segment, accounting for 22% of demand. Continued expansion of Australian mineral extraction and processing is projected to drive above-average lubricant volume and value growth compared to other industries. Locally blended premium hydraulic fluids, gear oils, compressor oils and greases suited to extreme conditions give Australian producers an edge in the mining space.

The personal mobility and electric vehicle boom will shape light vehicle engine oil demand. Improved fuel economy standards and 1900% EV sales growth forecast through 2030 will slow volume growth but spark high-performance engine oil innovations. Products like synthetic low viscosity oils help maximize engine efficiency and battery range.

Marine lubricants used in domestic shipping and fisheries are projected for steady growth through 2030 as port expansions progress. Demand is also rising for biodegradable oils to comply with ecological regulations. Locally made bio-based lubricants could gain traction.

While current economic uncertainty clouds the 2023 outlook, Australia’s lubricant market is expected to prove resilient based on essential applications across mining, manufacturing, transport and energy. Navigating base oil import reliance while leveraging production innovations for premium lubricants could solidify domestic brands’ positioning.

While total lubricant consumption is projected to see modest growth, Australia's increasing reliance on imported oils and specialty chemicals leaves the market potentially vulnerable to global supply disruptions.

Australian lubricant majors will likely continue acquiring smaller competitors and cementing ties with southeast Asian producers and Australian re-refiners this decade to shore up supply security. Brands able to consistently deliver premium, high-performance and more sustainably sourced lubricants to Australian businesses and consumers while adapting to circular economy trends are primed to capture value.

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