“Euro Oil Production” appeared as a new player on the Ukrainian oil products market a year ago.

This company became famous for participation in large fuels’ and lubricants’ supply tenders for “Ukrzaliznytsia” and the Ministry of Defence and also became famous for investments in own productions of petroleum products, in the industry that is considered “dead” in Ukraine.

The company has become noticeable not only in Ukraine, but also abroad for a year. “Euro Oil Production” has already signed contracts for supply of oils for gas station networks in Italy and Georgia.

Despite the fact that both Ukrainian and foreign markets are considered to be the “sphere of influence” of large world brands such as “Shell” or “Mobil 1”.

OilPoint had the conversation with the Head of “Euro Oil Production” Roman Chebaev about what competitive strategy should be followed in Ukrainian and foreign countries’ markets; in which sector it is more promising to work and ho to confirm the quality of oils and their components in Ukrainian reality conditions.

The complexity of the oil quality control process and why in Ukraine only few enterprises have accredited laboratories

Tell us please about your manufacture.

Today in our company we produce a full range of oils, consumed by both ordinary car enthusiasts and large industrial enterprises.

The company is situated almost in the center of Ukraine in Krivoy Rog. We have been working for a year and we can be called as a young enterprise by the existence standards of this industry older representatives. This statement applies not only to plant itself, but also to those employees who work there.

At the moment out of 30 people working at the enterprise half are young people who are not yet forty years old. An impressive amount invested by shareholders during the last year allowed us not only to master and put into continuous production the oils’ manufacturing and our own metal barrels, but to equip the testing laboratory with modern equipment as well.

We’ve got an incoming control system of raw materials. We manage every production stage.

Control is mandatory. We don’t accept raw materials simply by specification and quality certificate. Process is as follows: first of all we receive the samples and analyze them. If there is no conflict between the samples and the additives, if everything’s fine with compatibility, then we buy the raw material. But we don’t use it until we conduct our internal incoming control.

Today our laboratory is equipped very well, so we’re able to check the manufactured products at every stage of production and at every stage of packaging, Our laboratory is equipped so well that we can decompose oils into elements.

It may not be right when an oil manufacturer says so, but we firmly declare that diesel equipment can operate from 100 thousand kilometers and more on our premium oils.

Do you consider your company a “premium” or is there some kind of international certification procedure? How can you prove that you’re not worse than “Mobil 1”?

— How do we reinforce our words that our oil will match and work?
By operating tests.

By controlled oil operation it’s possible to understand what the oil change period is, if the oil fulfills its main functions, if it oxidizes ahead of time, if it “washes” the engine and if there are no slag sediments.

We can show it all on practice. We don’t just try to explain customer that the oil is good. Our gain is to solve customer’s problem and to minimize difficulties with the machineries.

Actually except laboratory audit we provide professional tools such as disposable samplers, disposable special pots for sampling oil. The user samples and sends to our company. After that we analyze the samples.

Analysis results are issued not just as dry numbers, but also as an interpretation. By analyzing the oil we can determine the “health” of the equipment, like, for example, by human blood you can determine the future trend. Without disassembling the engine, it is possible to understand which unit is wearing.

The consumer is able understand by the provided interpretation, whether his equipment works in a correct or incorrect way. We can prove it all empirically.

We’ve got laboratory audit as well. We’ve got one of the best production laboratories, where we conduct the spectrum analysis. We can say if the oil meets the declared characteristics in terms of certain components’ presence and in what volume these or those additives are present.

We conduct a set of laboratory tests that show us how the oil works, if it fulfills its functions and if it still can be used or it’s time for oil to be changed.

How is the production organized in your factory?

— We automated the processes and as much as possible minimized the things that ultimately affect product quality.

It’s not just the production itself. Establishing links between structural unit of the enterprise, control and marker points monitoring of the production process are very important too, especially in order to avoid possible problems in the future.

For example, we execute laboratory monitoring while producing one lubricant up to 9 repetitions throughout the entire production cycle. It could be done in a manner of some manufacturers in Ukraine. They boiled oil in a mixer, took a sample, analyzed it and started packing.

We don’t do like that. Undoubtedly, we check marker points while supplying raw materials into a mixer and while supplementing additives, and we don’t stop monitoring process when the oil is ready in mixer.

But after mixing the first part of the oil can be packaged in small packaging, the second part can be packaged in large packaging and the third part can be shipped in bulk.

What are the quality certifying oil ways of the specific brand or the specific manufacturer?

— Here is a few ways. Some manufacturers confirm their suitability with the documents, let’s say – the equipment manufacturer certificates. For example, there is the certification from Mercedes-Benz or the API certification system.

In our opinion, at the moment these are more marketing ploys, which are usually not supported by any facts. The oil manufacturer’s participation in development of the engine may be considered as a reliable quality certification. The rest is marketing.

Only a few oil producers in the world are able to pass full-fledged operational tests. Such kind of tests are mainly passed by the lubricants at the time of engine development or at the time of equipment development.

While a node is being calculated, the constructor sets all the moments: for how long the oil is supposed to work, what viscosity it should have and so on.

When the constructor develops some node, he understands, how the engine works, what the gaps are, what the diameters of the channels are, what the working conditions are.

How large consumers, for example, industrial enterprises can check the quality of your oil?

— I’ve been to “Zaporizhstal”. Yes, they invest some money into their laboratory, but there are more questions for staff experience. An engineer should conduct the research qualitatively, but not an ordinary laboratory assistant.

But there are few qualified personnel on the market, they work in our company or in our competitors’ companies. There is probably no laboratory accredited by the National Accreditation Agency of Ukraine in our country where can be done a full list of analyzes, even for “GOST”(State Standardization System) oil for UZ.

Why is it so?

— Because it’s necessary to invest into equipment. Our Ukrainian laboratories are equipped in a worse way than European ones. In European laboratory to upload the sample is enough in order to get the results of three or four analyzes in two minutes.

One analysis may take 30 minutes, the preparation may take 40 minutes, but, in general, one analysis takes an hour and a half.

Do you have your own accredited laboratory?

No, we started working short time ago. We’ve been working only for a year and we’ve already applied for accreditation. But first of all we are going to make a voluntary validation in two months. This process needs to be gone through as well and we take it quite seriously and responsibly.

Who will certify you?

We’ll be certified by regional, but quite serious organization despite the fact that it is not situated in regional centre. I think we’ll approach the accreditation stage next year. At the moment there is no mandatory order.

By the way, there are not many accredited laboratories in their internal systems in Europe. There is enough for equipment to be verified and for staff to be trained.

Getting accredited is not a bluff. It doesn’t work like you paid money and bought a certificate.

Also we rebuilt the quality management system “from scratch”. We don’t need to reinvent the wheel here. What we need to do is to connect all production stages so that, as a result, the consumer got the expected high-qualified product.

This system construction result was the obtaining of the ISO 9001:2015 certificate by our enterprise. Some enterprises have it only on the paper just in case to come-off.

— What’s the advantage in passing accreditation?

When we get the accreditation certificate we’ll be able to conduct the laboratory tests for our products’ certification and to provide paid services for this work to third parties.

— Do you plan to provide the laboratory audit services for a fee?

We plan to provide such services to our products consumers free of charge.

Actually, today only one organization provides such a service professionally, but this organization sends the samples abroad so it takes rather long time. We plan to do such kind of work at our enterprise.

We plan to develop our own research department except for the actual production of oils.

About what types of oil “Euro Oil Production” produces, how serious the competition is on Ukrainian market and what products are demanded by state monopolies and large industrial enterprises

— What types of oil are produced on your factory?

Engine oil, gear oil, hydraulic oil, compressor oil, reduction drive oil and many other types. They are all different types of oil. Every group, every type of oil has its own subtypes.

For example, engine oils are divided into gasoline, marine, diesel – two-stroke and four-stroke. Hydraulic oil has a lot of types as well depending on the purpose, and the equipment in which it can be used in the future.

— Is there any difference in the quality of your oil depending on the groups and types?

We produce low-cost materials, contingently speaking – “GOST group”. For example, famous truck oil M-10G2k is consumed by an old domestic equipment. We also produce oils for mod-price segment. Premium segment is a complete import substitution, Mobil, Shell and other famous world brand quality substitution.

— How do these materials differ depending on group?

Their manufacturing technology is the same. The difference lies in the use of raw materials and different additives. For example, for oils of the budgetary and part of the mid-price segment are raw materials produced in neighboring countries. It can be Lukoil, Rosneft and Belarusian manufacturers.

Some oil specifications require us to use additives from famous foreign companies. For example, in the premium oils production we use additives and packages only from acknowledged manufacturers of this industry such as BASF, Afton Chemical, Infineum, Eni. We have direct contacts with the manufacturers of these additives.

You need to use only tested in European and the US laboratories additive packages in order to obtain the desired performance properties; the additive packages which will allow our consumers to use these oils not for 10 thousand (we are talking about the gasoline group –Ed.), but for 15-20 thousand and more.
Diesel oils – we have the opportunity and we produce.

Now it’s impossible to do without additives from world manufacturers even in the production of oils for our Ministry of Defense. Because there is no alternative, because some of the produced during Soviet era additives are no longer produced.

— How many oil producers in Ukraine are you competing with?

There are five main manufacturers in Ukraine, including us. We are the youngest manufacturer. Moreover, our competitors have already planned to buy metal barrels with a capacity of 200 liters from us.

— Have you set up their production?

Yes, we proceeded to the metal containers production too. The equipment for it was in a rather dilapidated state, but the shareholders invested some money and we completely reanimated this production. I think we will proceed to the production of other metal containers, including small-capacity barrels in two years.

— Who buys your product? Is it mainly large industry?

Even private traders who have cars buy from us. At the same time, we supply products for the largest enterprises in our country such as “ArcelorMittal”, “Metinvest”, “Energoatom”, “Ukrzaliznytsia”, “Ukrgasvydobuvavannya”, Ministry of Defense.

Namely we are talking about native monopolies, which consume large volumes of products.

— Do you work for industry only in Ukraine?

Yes, so far. The shareholders set quite serious tasks, they have big plans, so it is necessary to increase the volumes. Money is invested in advance and it needs to be recouped.

— How did you get your market segment in Ukraine?

There was a desire and will to buy a company and produce lubricants. The shareholders assembled a team of like-minded people, assessed our abilities realized that in some ways we are better than others.

There are many tasks, a lot of work, but this year has shown we have found our place in this market. Everyone found out about us and everyone began to reckon with us.

— You’ve mentioned that you work with Ukrzaliznytsia and the Ministry of Defense, but they have completely different requirements for product quality, in contrast to Energoatom and Metinvest. Did this fact somehow influence the promotion of your plant in Ukraine?

Even in Ukrzaliznytsia the situation is changing, new equipment appears, for which new oils are needed. Their technics is quite new and only Mobil or Shell grade oil can be used there.

However, at Arcelor and Metinvest there are different obsolescence levels equipment, but it didn’t become a problem for us.

— Do large buyers have their own incoming quality control? At what price do they buy and what standardization do they apply?

For large buyers it is rather peculiar thing. Let’s take a simple example, the supply of packaged products to UZ by centralized procurement are carried out by the Production Support Centre branch.

All products are centrally delivered to the Fastov warehouse, loaded into wagons and sent from the roads according to the other. Previously, there was a certain agreement with the South-Western Railway laboratory, while accepting products, they came, took samples and gave their conclusion whether they accepted it or not. Then everything went to the depot, where also two or three analysis were done.

Now there is no primary control at UZ. The manufacturer ships its products to the warehouse in Fastov, then the manufacturer waits for a year or two until the lubricants are distributed at all depots. The farther the depot is from “centre” the worse equipment for assessing the quality of the lubricant.

— Is there any production facility where your oils cannot be used?

Everyone is afraid of complaints, questions. It came from the Soviet Union, when any complaint appeared everyone called the supervisor. And if you came with a bad answer, you would feel bad. But we don’t think so. If we receive a complaint, it’s good cause we’ll improve our service.

It often happens when the consumer cannot orient himself correctly. At my previous job, there were moments when a man poured an oil into the engine and it started “knocking” after 5 thousand kilometers.

Manufacturers contacted us to analyze their products. And there were complaints from them than from the dealers to whom we sell our products. Everyone simply always has questions about quality.

— Is it more interesting to work with large customers such as Ministry of Defense and UZ in Ukraine, or it is better to win the trust of people who will pour your oils into their cars?

— I think only the second option gives perspective. If you don’t fight for an ordinary customer, then at any moment you can generally stay out of the market, since contracts with native monopolies can be lost at any time. Therefore, it is necessary to work with both ordinary consumers and large companies. In my opinion, it gives perspective.

In terms of market share, it’s clear that we’ve just started, so now we are focused on large buyers. Of course, we try to change this situation.

It is clear that now at the stage of formation we work more in bulk. As a player in the bulk market we have already taken our place. We’ve got big plans not connected with purchases for UZ or Ministry of Defense.

We’ll work with dealers too and adhere to all our agreements. If it’s impossible to reach an agreement with dealers, we’ll work with the end consumer directly.

About international “Euro Oil Production” contracts why they buy Ukrainian oils in Italy and Georgia 

— As I know you’ve got the contracts with consumers in Georgia and Italy. What will you produce for them or are you already producing?

No, we have only the first negotiations taking place, we talk about their branded engine passenger cars oil. The same in Georgia. Negotiations are still underway with Azerbaijan. Perhaps Armenia will be interested, this week we’ll go there too.

— What level of oil do they want, the premium segment?

Yes, but we will produce for regional brands.

— Tell us more about this.

In Georgia they have a network of gas stations in the region and they want the stations to have their brand oil. Their working system with us can be varied: they can only give a logo, can describe the terms of reference for a sufficient level of oil quality, or generally agree on a product recipe.

In fact, in southern countries, consumers are quite unpretentious. Even in the UAE, in a rich country, it is enough for the oil to work for a mileage of 3 thousand kilometers. Such oils are even poured into Lamborghini and they may differ far not for the better what is sold on the Ukrainian market.

— Have Ukrainian manufacturers already supplied oils to southern countries before you?

Of course. In Georgia or in Azerbaijan large enterprises (railways or agricultural holdings) proceed to tenders with our oil manufacturers.

— What attracts them to Ukrainian production? What attracts them to you (as beginners) in particular?

We have something to surprise them with. How does the contact of foreign consumers with Ukrainian dealers take place? They are looking for good solutions and more flexible logistics. A customer comes and says, for example, he wants to receive products not in a metal, but in a plastic barrel of particular thickness and we are ready for this.

We have no hegemony to sell what we do, we sell what a customer needs. After all, nor end consumers but distributors address us and they will also have to do something further with received goods, display them in their stores.

Therefore, they are primarily looking for adequate people who understand that they will need to work for the market.

How do we really differ in quality from global brands, for example from Shell? No difference. In fact, domestic manufacturers lag behind in recognition of their Western competitors only because of the car owners’ greed. For example, “GOST” oil.

Does Lukoil has a bad base? But Lukoil may be different. It’s possible to buy their oil not in Russian Federation but in Western Europe. But they have achieved that “LUKOIL GENESIS” is №1 filling in the entire Russian automobile industry.

It’s the Lukoil filling number 1 for BMW and for assembled domestic cars. We just got used to the fact that for the first fill you can give bad oil which will be merged from the engine soon.

Why 2020 is going to be a year of unsatisfied demand on the oil market in Ukraine

— Let’s come back to Ukraine. You said you’re more consumer oriented. How serious competition is there in this segment and how do you plan to increase your share of consumption among motorists?

There are more than 200 domestic and foreign brands of oil, but only few of them provide service. Customer needs to be explained how best to use oil, customer wants someone to take on his problems and solve them for him.

Not only customer wants it, but distributer wants it too. There are few distributers who have their own full-fledged technical support service. We’re creating that kind of service.

It is necessary not to sell something to customer but to solve his problems so there is feedback with manufacturer. For example, in my previous job customer bought an oil on the Rosette, then somehow he found my number and I consulted him on all issues.

Why do Mobil or Shell cost rather expensive? They provide service. This service is removed in time, their entire analysis procedure takes a month, when we’re here. Of course, we learn from them.

— So due to the lack of a full-fledged service, even in 2020, with an overabundance of oils, there will still be unmet demand?

No doubts. And not only for domestic but for the import group. For example, there is one distributor in the Zhytomyr region, which serves a very famous national holding. This holding previously bought imported oils, but then purchased some domestic equipment.

They thought: if we buy domestic machinery, why don’t we buy domestic oil for it? Of course they didn’t try to jump into the deep end here. They started monitoring: is there an internal control of production, what services are provided at the stage of product shipment, is there any support.

I gave them a whole lecture. One week later they decided to use the oils and antifreezes of domestic production. People are looking for quality at a reasonable price and they want service. It will always be in demand.

WEXOIL works for people who’s used to think rationally, act purposefully and cope with assigned tasks.

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EUROOIL is an exclusive distributor of WEXOIL products.
Address Museum lane, 4. Kyiv, Ukraine; 01001.
Phone number: +380 050 451 97 99 Alexander Urchenko

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EUROOIL is an exclusive distributor of WEXOIL products.