UAE: World’s Hottest Lube Market


DUBAI – Stimulated by the countrys ongoing economic surge, lubricant demand in the United Arab Emirates has nearly doubled in the past two years, according to an Emirates National Oil Co. official who addressed an industry conference here.

The nations blending capacity, which already had an enormous surplus, has risen at a similar pace, said Thangavel Rathina Kumar, manager of lubricants technology for Enoc Lubricants. As a result, the capacity overhang has swollen to more than 800,000 metric tons per year, and the U.A.E. has become a bigger and bigger lubricant exporter.

The country has a large over-supply of lubricants and supplies much of the surrounding region, as well as many countries further abroad, Kumar said during his Oct. 28 presentation at the Fifth ICIS Middle Eastern Base Oils and Lubricants Conference.

The U.A.E.s building boom has been going on for a decade, so it is no surprise that lubricant demand is rising. Two years ago, one analyst predicted that domestic consumption would grow upwards of 10 percent per year in subsequent years, a rate that would have made the country one of the worlds fastest growing lubricant markets.

In fact, the market far exceeded that projection. According to Enoc, in-country demand was 135,000 tons in 2007, not including sales of marine lubricants. This was up from 70,000 tons in 2005, meaning consumption grew an average of 39 percent each of the intervening years.

Kumar said the rate of growth in the U.A.E.s economy – and therefore domestic lubricant demand – will be lower in coming years.

The real estate boom will slow down this year and from now on due to the global financial meltdown, he said.

Despite the sharp increase in domestic demand, the U.A.E. continues to have enormous surplus capacity to blend lubricants. Kumar pegged capacity at 1 million t/y in 2008, up from 560,000 t/y in 2006. He added that a significant portion of this capacity is not used. Reliable production statistics are difficult to obtain, but he estimated that the country makes between 600,000 tons and 800,000 tons of lubricants per year.

New capacity has generally been built with exports in mind. The country has traditionally been a shipping transit point for trade between the East and West, and its lubricant blenders send products to much of the Middle East and to a large number of countries further abroad.

Some of the new capacity also targets the marine market. Enoc is currently building a 100,000 t/y plant in Fujairah, U.A.E., that will supply marine lubes through that citys port, as well as other types of lubricants through other channels.

According to Kumar, the U.A.E. has the most blending capacity in the Middle East – ahead of Irans 800,000 t/y and Saudi Arabias 700,000 t/y. The quality of products tends to be relatively high. The minimal performance level of engine oils used in gasoline-powered cars is API SJ, while diesel engine oils are generally API CF or above.

Three fourths of the volume of diesel engine oils consumed in the U.A.E. are monogrades, but the market is shifting toward multigrades, partly due to decreasing availability of bright stocks.

Diesel engine oils constitute the biggest chunk of the domestic market, accounting for 35 percent of demand, Kumar said. Passenger car motor oils are next at 30 percent, followed by specialty lubricants (24 percent), hydraulic oils (14 percent), transmission oils (4 percent) and greases (3 percent). Forty-five percent of lubricant volumes flow through commercial and industrial sales channels, he added. Another 22 percent are sold by retail stations and oil change centers, while marine outlets account for 15 percent. High street sales account for 10 percent, government tenders 8 percent.

Major international oil companies and oil companies owned by two emirates dominate the market with 85 percent of sales volumes. Abu Dhabi National Oil Co. leads with a 25 percent share, followed by Shell at 13 percent, Caltex at 12 percent and Enoc and Mobil, which both claim 10 percent.

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