Who Will Market Ruwais Base Oils?


ABU DHABI, United Arab Emirates – Finnish refiner Nestes role in the sales and marketing of API Group II & III base oils produced at Takreers plant at Ruwais, United Arab Emirates, has been cast into doubt following remarks from Takreer and Abu Dhabi National Oil Co. (Adnoc).

The plant, wholly owned by Adnoc, is set to produce up to 500,000 metric tons per year of Group III base oils as well as 100,000 t/y of Group II and is scheduled to be commissioned by the end of the year. Neste previously stated it expected Abu Dhabi Oil Refining Co. (Takreer) would supply the feedstock as well as operate and maintain the plant, while Neste Oil would be responsible for the sales and marketing of the base oils on behalf of Adnoc.

That arrangement now looks uncertain after comments by executives from Takreer and Adnoc at the BLM Base Oil & Lubes Middle East conference in the U.A.E. capital. Takreer was established in 1999 as a public joint-stock company to take over the responsibility of refining operations previously handled by Adnoc. During a presentation, Fareed Mohamed Al Jaberi, vice president for Takreers supply division, said in answer to a question that Adnoc would handle all marketing of base oils, with around 50,000 t/y earmarked for Adnocs own internal use. In separate comments, an executive from the marketing and refining directorate at Adnoc reiterated it would assume full responsibility for marketing of the Group II and III base oils produced at Ruwais, and there was no partnership agreement currently in place with a third party.

Yet, according to Neste spokeswoman Ulla Kotila, discussions with Adnoc over sales and marketing are ongoing. The commercial negotiations continue, and the terms will be defined closer to the startup of the unit. Despite the emphatic comments from Takreer and Adnoc, Neste hopes to replicate its joint venture in Bahrain where it partnered with Bahrain Petroleum Co. (Bapco) and markets base oils produced there under the Nexbase brand. Nevertheless, a source familiar with the discussions, who spoke on condition of anonymity as the negotiations are not public, said Adnoc has the capability to go it alone. Its 70/30 and Adnoc can take advantage of big demand from regional markets as well as Group II demand from India.

In 2007 Neste, Takreer and the Austrian oil and gas group OMV signed a heads of terms agreement for the design, construction and operation of the plant which envisaged Neste handling the marketing of very high viscosity index Group II/III base oils with viscosities from 2 centiStoke up to 6 cSt. Neste said at the time the joint venture would be 60 percent owned by Takreer and 20 percent by Neste and OMV, respectively. However, in 2010, Takreer awarded the EPC (engineering, procurement and construction) contract to Hyundai Engineering, and joint venture negotiations ended in early 2011, effectively scrapping the earlier agreement. Even so, Neste and Adnoc agreed to remain in discussions over the partnership arrangements.

The Ruwais plant is designed to use ExxonMobil Research and Engineerings hydroisomerization technology and Neste Jacobs’ distillation technology.

Analysts say Adnocs comments reflect a growing confidence on the part of national oil companies, who believe the Middle East will become a base oils hub thanks to the changing dynamics in the global supply chain. They add that Adnoc recognizes the lubricant business is a high margin industry that complements its existing infrastructure. The broader development also highlights the different strategies being pursued by regional refiners and lubricant companies, placing longstanding relationships with international companies under scrutiny.

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