Iranian strikes on the United Arab Emirates, Bahrain and Qatar have shut down roughly a fifth of the world’s API Group III base oil capacity, threatening severe supply disruptions for lubricant manufacturers reliant on Middle East base stocks.
Iran targeted the three countries — all hosts to U.S. military assets — in retaliation for a U.S.-Israeli-led bombing campaign against the regime in February.
Abu Dhabi National Oil Co. has capacity of about 10,300 barrels per day of Group III, while Bahrain’s Bapco refinery in Sitra produces roughly 8,200 bbl/d. Shell’s Pearl gas-to-liquids plant in Ras Laffan, Qatar, produces about 22,000 bbl/d.
A fire caused by a drone strike forced Adnoc to shut its Ruwais refinery after the complex had already reduced operations. The site is now closed. Bapco declared force majeure on group operations after an attack on its Sitra refinery complex.
Operations also ceased at QatarEnergy’s Ras Laffan industrial complex, one of the world’s largest liquefied natural gas processing facilities. The hub supplies gas feedstock to Shell’s Pearl gas-to-liquids plant, which produces high-quality Group III base oils used in premium lubricants.
Shell declined to comment on whether the Pearl facility was directly affected, though the company declared force majeure on traded LNG cargoes.
Much of Bapco’s Group III output, called Bapbase, is distributed by Shell Trading and Shipping Company in North America, where it has API approvals required by lubricant manufacturers in that market. Adnoc’s Adbase is supplied by Chemlube in Europe, where it has some of the OEM approvals.
Some suppliers have already added surcharges to existing inventory, industry consultant Jan Trocki told Lube Report.
“If you’re not already contracted to Adbase or Bapbase, the spot market will be vicious,” Trocki said.
U.K.-based base oil trader Ray Masson estimates there’s about two-months-worth of inventory in tanks in Europe and the US.
“From there on in, no more coming from the Middle East. So then you’ve got to rely on other production or switching production,” Masson told Lube Report.
Group II producers could switch over to making small amounts of Group III, he suggested.
On Friday, the Independent Lubricant Manufacturers’ Association asked the American Petroleum Institute to invoke force majeure provisions that would allow blenders to substitute base oils or adjust formulations while maintaining compliance during the supply crisis.
“This supply disruption is creating real operational challenges for lubricant manufacturers across the country,” said Holly Alfano, CEO of ILMA. “ILMA is actively engaging with key licensing bodies and industry partners to secure the flexibility our members need to maintain supply while preserving the performance and quality standards the market depends on.”