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Castrol supplies lubricants in venture with Cubapetróleo
CubaNews / July 2004

By Larry Luxner

HAVANA — A spacious mansion on the corner of Quinta Avenida and Calle 6 — right at the entrance to Havana’s Miramar suburb — serves as the headquarters of Castrol Cuba S.A., one of the island’s oldest foreign joint ventures.

Established in 1992, the venture is a 50-50 partnership between state-run Cubapetróleo and Castrol B.V., a unit of Castrol Holland).

Castrol itself is part of BP, which purchased Burmah Castrol Ltd. in 2000 for $4.7 billion.

Castrol, founded in 1899, is best known for its sponsorship of championship race-car drivers; nostalgic black-and-white reproductions of old Castrol advertisements adorn the company’s reception room.

Carlos Machtus, general manager of Cas-trol Cuba S.A., said Castrol has sold its products on the island since the late 1950s. Last year, the venture sold 7 million liters of lubricants worth $12 million to Cuba’s automotive, industrial, agricultural and maritime sectors.

“This joint venture was established with the objective of delivering products to the U.S. dollar market,” Machtus told CubaNews in a recent interview. “Lubrication is a need anywhere in the world, and although the automotive industry is our most visible [sector], it’s not the most important in Cuba.”

Rather, Castrol’s largest customers here are the mining, cement, energy, power generation and transport sectors.

Among its top clients are Canada’s Sherritt International, which operates a nickel mine in Moa, and Cementos Cienfuegos S.A., an outdated cement plant currently being modernized with $105 million in Spanish capital (see CubaNews, April 2004, page 6).

Divided by sector, Castrol Cuba’s market consists of commercial vehicle fleets (40%); mining, power generation and other heavy in-dustry (30%); the shipping industry, including container vessels and fishing fleets (20%), and privately owned passenger vehicles (10%).

“Castrol is bringing in the most advanced technology to Cuba, and of course there’s a demand for our products,” he said. “Lubrica-tion is not a luxury. If you have more money, you can buy more wine, but lubrication is essential because your car has to function. And if a power plant fails, there’s no light.”

Machtus, a Spaniard, arrived in Cuba two years ago. As general manager of Castrol, he heads a staff of 40 at company headquarters in Miramar and at a warehouse in the Havana suburb of Lawton.

What’s it like to do business here, we asked Machtus.

“It’s really like in any other country,” he responded. “You have to sell, you have to collect money, you have to decide which product is for whom. In this sense, it’s quite normal. Of course, since 40% of our products come from outside Cuba and are the most sophisticated ones, you have to be very cautious.”

In Cuba, Castrol produces mineral oils at the Cubalub plant near the Port of Havana, and at another factory in Santiago de Cuba.

“Our business starts with base oils, which make up 90% of the product, plus additives. Lubricant companies normally don’t produce base oils; those are produced in the refinery.

“We import base oils from Italy. The Cuban government also imports base oils from Italy, Venezuela, wherever they can find it,” he said. “Here, there is no base oils production, because there must be a critical mass and that requires a huge investment.”

Cuba’s total market for lubricants is around 70 million liters, which is divided between the peso market and the dollar market. The peso market (around 55 million liters), is 100% do-minated by Cubalub, while the dollar market (comprising the remaining 15 million liters) is worth around $20 million, and is split evenly between Cubalub and Castrol.

That makes Cubalub both a competitor and an indirect partner of Castrol, since the two companies have a production agreement.

Machtus said Castrol doesn’t sell directly to Cuba’s sugar industry, since that’s part of the peso market, though sugar harvesters occasionally use Castrol lubricants.

At the moment, Castrol offers 150 different products and sizes to the Cuban market. At the retail level, however, only a handful of products are available.

In mid-April, at the Cupet-Cimex gas station along Quinta Avenida in Miramar, a one-gallon jug of Castrol SAE-50 motor oil was selling for $14.20, while a similar-sized jug of Cubalub cost $11.00. Since then, retail prices at dollar stores have risen 10-15%.

Machtus declined to discuss profits, saying only that “if we’re here, it’s because our business is profitable.”

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