Sanctions Stymie Iranian Base Oil Ventures


DUBAI, United Arab Emirates – Iranian refiners have planned what could become the first two Group II and Group III base oil plants in the Middle East, an official from Behran Oil Co. told an audience at an industry conference here last week. The projects are stalled for the time being, though, due to economic sanctions imposed by the United States and other countries.

The comments offered evidence of the drag that political tensions are exerting on the regions biggest lubricant market.

Both of the Iranian projects have reached advanced stages of planning, Behran Oils head of foreign procurement, Peyman Fayazi, said Oct. 23 during an address to the ICIS Middle East Base Oils Conference. Behran Oil has planned one of the projects. The Tehran-based company has formed a subsidiary, Azarsunshetab, which plans to add a Group II plant with capacity to make 400,000 metric tons per year to an existing oil refinery in Tabriz, in northwestern Iran.

The other project that Fayazi mentioned is a joint venture between lubricant marketer Sepahan Oil and chemical maker Fouman Chemie Co. According to Rodin Co. Managing Director Mehrdad Vajedi, who claims to be working with Fouman on the project, that plant would be built in the southern city of Bandar Abbas and would have annual capacity to make 250,000 tons of Group II and III oils. Vajedi told Lube Report recently that the joint venture has already purchased land, completed site and feasibility studies and begun engineering, but has been prevented by sanctions from licensing necessary technology.

Fouman is a chemical supplier based in Tehran. Rodin is a consulting and market research firm working in the Iranian market.

Fayazi expressed confidence that both projects will eventually be completed.

They are approved, he said. They will be built.

Finnish refiner Neste Oil and Bahrain Petroleum Co. have formed a joint venture that is also vying to build the Middle Easts first producer of highly refined base oils. The companies plan to open a 400,000-ton Group III facility in Bahrain by mid-2009.

Iran is the heavyweight in the Middle East for production both of base oils and lubricants. The country has five base oil plants – Behran Oil and Sepahan own one each – with total capacity to make 960,000 metric tons per year. The region has five other plants, two in Saudi Arabia with combined capacity of 540,000 tons and three in Iraq with nameplate capacity of 760,000 tons. Fayazi said production out of Iraq is actually much less because of conflict there.

According to another of the conferences presenters, Emirates National Oil Company Chief Financial Officer Kamal Said, Iran consumes 700,000 tons of finished lubricants annually, accounting for 39 percent of the regions total demand. Saudi Arabia is the second-largest market, at 350,000 tons.

In general, Iran also has some of the lowest quality lubricants in the region. Minimum performance level is API SC for gasoline engine oils and API CC for diesel engine oils. By comparison, Kuwait and Oman have the highest minimum levels in the region, API SJ and CF. The latest API standards in developed parts of the world are SM and CJ.

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