# Presentation: 134420

## U.S. Commercial Service Seminar
D. J. Fries
The Lubrizol Corporation
May 23, 2006

**Lubrizol in China**

**U.S. Commercial Service Seminar**
**D. J. Fries**
**The Lubrizol Corporation**
**May 23, 2006**

## China – Land of Opportunities

- Area: 9.6 million km2
- Population: 1.3 billion
- Opened its doors in 1978
- GDP growth: 9.1% in 2003
- GDP: $6.45 trillion in 2003 (PPP basis), 2nd largest
- 2nd largest consumer of primary energy
- 4th largest vehicle market
- 4th largest manufacturing output
- World’s largest number of cell phone users
- Growing middle class/ consumer purchasing power
- Economy:  hybrid of central planned/market
- Became a member of World Trade Organization in 2001

**Notes:**
2/3 of China’s population and more than two third of GDP are concentrated in its coastal provinces. 

## Petrochemical Supply Chain

**Base Oil**

**Petrochemical Supply Chain**

**Fuels**

## Lubrizol History in China

**1984**		**Technology sold to Sinopec**
**1993****	****	****In-depth market study conducted**
**June****	****1994****	****Lubrizol China incorporated**
**Oct.****	****1994****	****Representative office formed - Beijing**
**Nov.****	****1995****	****Letter of Intent signed - blending joint venture**
**Mar.****	****1996****	****Equity joint venture contracts signed - Tianjin and Lanzhou ****	****	****	****    blending plants **
**Jan.****	****1997****	****Letter of Intent signed for component manufacturing joint ****	****	****	****   venture - Lanzhou**
**Dec.****	****1998****	****Lubrizol Shanghai Trading Company formed**
**Oct.****	****2000****	****Lanzhou joint venture expanded**
**Feb.     2004****	****WFOE formed - Lubrizol Shanghai Fluid Technology Co.**
**Mar.     2004****	****Lanzhou purchased Tianjin assets**
**June****	**** 2004****	****Noveon acquired – had business entities in greater ****	****	****	****	****    Shanghai, Beijing and Hong Kong**
**Mar.****	****2006****	****Tianjin and Lanzhou JV’s consolidated**

## Lubrizol Growth in China

**Direct Plus Joint Venture**

## What is a Joint Venture (JV)?

- JV is separate legal entity
- JV and partners are governed by contracts
- Partners often have divergent goals for JV
- JV co-exists with the parents

## Our Partners

- 	1996		_Sinopec_ Lanzhou Petroleum Processing and 			Chemical Complex (Lanlian)
- 	1998		_CNPC_ Lanzhou Petroleum Processing and 			Chemical Complex (Lanlian)
- 	1999		_CNPC_ (China National Petroleum	Corporation)
-  Late 1999	_PetroChina_
- 	Early 2000
- 	2002		_PetroChina_ Lube Company

## China Auto Production – History and Projection

- Source: KGP

## Legislation
For example, Euro-type emissions standards are being adopted within Asia

This will result in upgrade in vehicle technology 
Focus on how additive technology can support and enable OEMs to meet these challenges

- For example, Euro-type emissions standards are being adopted within Asia
- This will result in upgrade in vehicle technology
- Focus on how additive technology can support and enable OEMs to meet these challenges

## Key Drivers Influencing Lubricant Demand

**Key Drivers Influencing Lubricant Demand**

## China and India Are the Fastest Growing Markets for Lubricants and Additives

**China and India Are the Fastest Growing Markets for Lubricants and Additives**

**But, global demand is expected to be flat**

## How Do We Sell in China?

**Direct Import**

** ****Shanghai Lubrizol International****   Trading Company**
** ****Higher technology products**
** ****All imported from U.S. and Europe**

** ****Engine oils (mid- and low-tier)**
** ****Components**
** ****PetroChina is our partner**

**JV**

**Two-Legged**
**Strategy**

## Conclusion

- China is growing and changing rapidly
- Success requires commitment of time, money and resources
- Go to China for the long term
- There are no secrets in China
- Do your homework and be prepared for surprises