Rebuilding Iraqs Lubes Industry


DUBAI – The reduction of hostilities in Iraq is creating opportunities in the countrys lubricant market. It is a market that has a great deal of potential based on its size and history, an industry insider told a conference here last month. But attendees also heard that little is being done to take advantage of that potential.

The lube industry in Iraq has much potential and is important to the countrys economy, Saadallah Al Fathi said after an Oct. 13 presentation at the ICIS Middle Eastern Base Oils and Lubricants Conference. But there has been a great deal of disregard that has left the industry in a sad state.

Iraq had a well-developed lubricant market, owing to the size of its economy and oil industry. From the late 1960s until 1990, the industry grew steadily, from annual production levels of approximately 27,000 metric tons per year to approximately 250,000 t/y, according to Al Fathi. A native of Iraq, he worked for years in the countrys Oil Ministry and for OPEC, culminating as an advisor to top officials at the ministry. He left that post after 2002 and is now an advisor to Dome International Petroleum, an oil, gas and power equipment supplier based in Dubai.

Al Fathi said Iraqi lubricant production dropped by more than 50 percent during the 1990-1991 Gulf War, when the countrys three base oil plants were damaged. Most of the damage was subsequently repaired, and finished lube production revived somewhat to hover between 130,000 t/y and 180,000 t/y for the next decade.

But the industry suffered from neglect and United Nations sanctions that obstructed acquisition of spare parts and chemicals. Then the current war began in 2003, and lubricant production declined sharply to its lowest levels in four decades. In 2008 the industry produced approximately 22,000 tons, Al Fathi said. In 2009 that number should increase to approximately 45,000 tons.

Lubricant demand certainly fell when the current war first began, but has since rebounded somewhat, Al Fathi said. The biggest change, however, is that most of the volumes consumed are imported from other countries. In 2008, the country imported 225,000 tons of lubes, 10 times the level of domestic output. This year imports are projected to fall to approximately 200,000 tons.

The Iraqi government owns the countrys oil facilities, including all lubricant blending plants, and finished lubes are marketed by the Directorate for Oil Products Distribution Co., which is responsible to the Oil Ministry. Clearly there are opportunities to increase sales, Al Fathi said, but the government has failed to develop the business.

It is simply disregard to the production facilities and dependence on imports, he said. There is also reluctance to import sufficient chemicals and other operating materials. Corruption could be part of the game as merchants in the private sector are making lots of money in the meantime. This is the new Iraq.

Al Fathi offered a long list of steps needed to help the recovery of Iraqs lubricant industry. Base oil and lubricant facilities need to be rehabilitated and then must be maintained better than they have been until now. He advised that plants be modernized, but emphasized that focus should for the moment be placed on technical innovations that can be incorporated easily. He singled out instrumentation and control systems among the areas that require upgrading.

Al Fathi said the industry has wide-ranging needs for more training programs – to advance knowledge for operations, research and product development, testing and sales. He advised that the country should upgrade the quality of base oils it produces and renew approval certificates.

The struggling domestic industry is not helped, Al Fathi said, by the ease with which imports are flooding into the market. Some come through sea ports from countries bordering the Persian Gulf. Others come by truck from Iran, Saudi Arabia and possibly Syria and Turkey. These lubricants are brought in by individual merchants or agents of foreign blenders and are sold mostly in maintenance and repair centers. Some car sales agents have begun importing to ensure a supply of quality lubricants.

There is a lack of regulation, and imports are coming in like any material, Al Fathi said. There is no control on quality or source.

To help stem and control the flow he advised the government to implement regulations and procedures, and to mandate quality certificates.

Al Fathi said the government may need to enter joint ventures with foreign lubricant companies to help bring about the changes necessary to revive the industry. But he lamented that he sees no inclination toward the steps that he considers necessary.

I have not seen any movement to even implement part of my recommendation, he said. This is part of the general disregard for the industry.

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