Bharat Petroleum Corporation is entering into a technical collaboration with US-based Chevron Lummus Global, LLC to produce lube oil base stock.

The downstream oil major is setting up a manufacturing facility in Mumbai, which will produce lube oil base for captive consumption as well as for sale to other domestic players, a source said.

Lube oil base is used to produce lubricants. Chevron Lummus will only provide the technology for the project, for which BPCL will pay it a royalty, which the source declined to disclose.

So far, BPCL has been procuring lube oil base from either Indian Oil Corporation or Hindustan Petroleum Corporation, the two other public sector petroleum giants which also produce their own brand of lubricants.

In 2002-03, BPCL sold 117 TMT of lubricants. The separate brands for petrol, diesel and two-wheeler lubricants were brought under the umbrella brand MAK earlier this year.

The Mumbai-based facility will be able to produce 180 TMT of lube oil base. BPCL will be in a position to sell the excess capacity to other lubricant manufacturers operating in the country, including a few foreign players.

The source said that the group II base oil, which BPCL will manufacture would cost between $325-400 per tonne.

The new capacity will, therefore, help BPCL save in costs and give it a price advantage on lubricants.

In the last financial year, BPCL has developed seven new grades and cost effective formulations for 10 existing grades. These formulations will result in a saving of Rs 7 crore (Rs 700 million) per annum.

Despite the growing competition in the lubricants market in India, BPCL's strategic business unit for lubricants has been posting better results.

In 2002-03, the lubes volumes sold was 117.27 TMT -- an all time high, surpassing the previous highest prior to deregulation of the lubes business in 1992-93.

The growth registered over the past year was 12 per cent, which is also a record for the company.