Universal Lubricants is going 'green,' poised for growth
06/09/2011 6:50 AM
06/09/2011 6:50 AM
The excitement is palpable in John Wesley's voice as he takes his Wichita used-oil refinery green. Wesley, the chief executive of Universal Lubricants, doubles as the chief evangelist for the company's closed-loop collection and distribution process for used motor oil.
Someday soon, he intends to have a nation full of believers.
Universal's business is collecting used motor oil and re-refining it back to a virgin state for use in cars and diesel engines and by asphalt contractors.
It's on the forefront of the industry's shift from the days when used oil was burned away.
"The highest value for used oil for years and years used to be the burner market," said Wesley, a 30-year petroleum industry veteran with 25 years on the Valvoline payroll.
"And that was OK, certainly better than illegally dumping the product or disposing of it in an improper manner.
"The problem is, once used oil is burned, it's gone. So we believe that the highest value over the short term became refining the oil to a virgin approved specification."
That's why Universal invested almost $50 million in a new north Wichita re-refining plant that opened in August 2009.
And that's why Wesley wants to build another refinery on the site, a multimillion-dollar project that could add 200 to 300 jobs to the 340 already at Universal.
It would be a big boost to Universal's business and production, requiring three shifts and 24-7 operation, Wesley said.
The timing of that expansion is key, Wesley said: Universal is an early entrant in an industry-wide move to recycled oil, with only Valvoline's NextGen and EcoPower oil competing with Universal's Eco Ultra.
It's a new market that's on the radar of national analysts.
"Recycled motor oil has been around a long time and, if done right, is just as good as new," said John O'Dell, a senior editor at Edmunds.com. "It's the additives, not the oil, that break down and make the oil in your crankcase 'dirty.' "
But recycled oil remains a novelty to consumers due to lack of marketing, O'Dell said.
"It's use is growing, slowly, mainly because lubricating oil manufacturers are using more of it in new lines labeled 'recycled,' " O'Dell said.
"I haven't seen any signs, though, that consumers are clamoring for it, mainly because people don't understand that recycled motor oil is just as good as new."
Universal has a client in Wichita who's a big-time believer. Roger Scholfield's dealership has its own private oil label, "Generation Green," using recycled Universal oil.
"I can't tell the difference.... It is something we've had great success with," Scholfield said. "I do feel like there's a real impact on the environment because one barrel of Generation Green replaces 50 barrels of crude oil.
"We perform a thousand express oil changes a month at Scholfield Honda, and our percentages of re-refined oil run as high as 50 percent some months."
A history of innovation
Universal's dip into recycled motor oil is consistent with the company's 82 years of innovation in Wichita under the Maloney family.
The company started as a lubricant distribution business, then began compound blending and environmental services, all "pretty unique business strategies for the day," Wesley said.
These innovations aren't cheap: Current refinery construction costs between $3 and $5 per production gallon, or as much as $100 million for a 20 million-gallon refinery.
Nonetheless, the move into re-refined oil has been popular with the company's New York investors, Wesley said, who are supportive of expansion.
"We're doing well in a downward business cycle. That's not the problem," he said.
"The problem is, are you prepared to take advantage of an up market? With a second refinery and the time it takes to turn the switch, it's a two-year process.... Another facility allows us to go to a second or third shift and double or triple our manpower needs."
The mechanics of green
Here's what really ratchets up the excitement in Wesley's voice: Universal's closed-loop process, he said, makes the company the only refiner that never loses custody of the used oil it collects, refines and redistributes.
"There are three reasons to be in the oil recycling business," Wesley said. "One is environmental. You've got a passion to do the right thing environmentally.
"The other is the ability to produce a base oil from re-refined materials versus a virgin oil. There should be an arbitrage there.
"And the third is a high demand for a re-refined product."
Wesley admits that each of those factors is evolving. Today, Universal doesn't have a retail oil product, although company officials are hard at work rebranding the Eco Ultra name for retail use.
"Evolving with the help of the other marketers who've gotten into re-refined product like Eco Power and Valvoline," he said.
"Valvoline, Pennzoil and Castrol are the market leaders on the DIY (do it yourself) side. They control about 60 out of every 100 quarts sold in a mass merchant.
"The other 40 percent are best value alternatives to those brands. We think the opportunity is there for Eco Ultra to be a best value alternative to those brands."
Wesley wants a lower price point for Eco Ultra — by as much as 50 cents a quart — since the major companies don't discount their recycled oil, choosing instead to market it to consumers as a green alternative.
Recycled oil is a story Wesley is confident to tell.
"You have a defined resource in crude oil," he said. "It never wears out. Why would you not want to keep it in play?"