The Kingdom of Saudi Arabia is the fastest growing economy in the region, said Nawar, introducing his overview of the Saudi lubricant market. Its lubricant market is the largest in the Gulf Cooperation Council, and its unique.

Per capita income in the Kingdom is predicted to rise from $24,000 today to $33,500 by 2025, Nawar said. Saudi Arabia is the top foreign investment destination in the Arab world and the largest free economic market in the Middle East, with 25 percent of Arab gross national product. Business growth is massive, as indicated by the U.S. $870 billion of infrastructure projects currently underway.

The countrys total finished lubricant market in 2012 was 405,000 tons, with 360,000 tons consumed domestically and 45,000 tons exported to Africa, Asia and other regions. The top market players are Petromin, with 37 percent of the market; Fuchs with 22 percent; Shell with 20 percent; Mobil with 9 percent; and Gulf with 8 percent; leaving just 4 percent for others.

Fully 80 percent of the Saudi lube market is engine oils. Of the total market, 41 percent is diesel engine oils and 39 percent is gasoline engine oils. Industrial oils account for just 10 percent of the market, marine oils for 6 percent, grease for 2 percent, and specialties for the remaining 2 percent.

Unfortunately, 73 percent of Saudi oil changes are done in puncture shops, said Nawar. Look-alike and low quality oils are sold in puncture shops. There are problems with the quality of lubricants sold here. Car dealers have 11 percent of the oil change business, and modern quick lube centers have 12 percent.

Petromin Express has 200 outlets, Nawar noted. By 2020, he expects that number to grow to 600 outlets. But in Saudi Arabia there are 10,000 puncture shops and 1,000 car dealers.

Oil drain intervals are short – far shorter than in Europe, Nawar continued. On the gasoline engine side, about 23 percent change their oil after 3,000 to 5,000 kilometers of driving; 60 percent change their oil between 2,000 to 3,000 km; and the rest change their oil after fewer than 2,000 km.

Drain intervals are slightly longer for diesel engines, where 69 percent go 3,000 to 5,000 km between oil changes; 25 percent go 2,000 to 3,000 km; and the rest change their oil after fewer than 2,000 km.

On the gasoline side, multigrades have gained 84 percent of the market, but diesel is almost the opposite, Nawar said. Monogrades still have 76 percent of the heavy duty engine oil market.

The Saudi lube market, said Nawar, is growing at a rate of 3 to 4 percent annually, and that is projected to continue through 2015.

The Kingdoms lubricant additive market is estimated to be 32,000 t/y, with 30,000 of those tons supplied by the four global additive giants: Lubrizol, Chevron Oronite, Infineum and Afton.

Base Oils
Saudi Arabia has two base oil refineries, both owned and operated by Luberef, with total current capacity of about 550,000 t/y, all Group I. Imported Group II and III currently represent less than 2 percent of total consumption. But base oil production in the Kingdom will double by 2016, when Luberef begins production of Group II base oils, along with expanded bright stock production, at its Yanbu plant.

Beginning in the first quarter of 2016, said Nawar, Group I will account for just 37 percent of Luberefs output and Group II for 63 percent.

Blenders in the Kingdom are already working with Luberef on the transition to Group II, including obtaining product approvals and setting up logistics to manage the new base stocks. In addition, blenders are working closely with Luberef on the balance between straight-run and blended products, for example if 600 neutral or 260 neutral are required.

The economics of the transition will be a challenge, Nawar said, suggesting that pricing and other economic factors may affect how fast Group II and III base oils are adopted.

Although about 200,000 t/y of used oil are collected, none of the Kingdoms major lubes blenders use rerefined base oils because of low quality and negative perceptions, said Nawar. Several projects have been proposed to produce higher quality Group II and III rerefined oils, and investors are interested.

Saudi Arabia will see a major shift in lubricant and base oil quality beginning in 2016, Nawar concluded. Multigrade oils will grow more popular, demand for synthetic oils will grow and more sophisticated recycling facilities will be introduced. And surplus base oil and blending capacities will lead to greater export opportunities.