The Middle East is transitioning to higher quality lubricants but at a slower pace than previously thought, as recent research found monogrades and high-viscosity motor oils are continuing to dominate the regions heavy- and light-duty markets.

Consultancy and market research company Kline & Co. reported that monogrades still account for 50 to 55 percent of the regions heavy-duty diesel engine oil market, which consumes between 600,000 and 700,000 metric tons per year, with SAE 50, 40 and 30 grades highly prevalent. That is in stark contrast to the global average of just 3 percent, according to data from United Kingdom-based additive supplier Infineum.

Africa and the Middle East account for a combined 9 percent of global lubricant demand, according to Kline.

Dusty Groove

Beyond the headline statistics, however, there are structural and environmental reasons for the difference with the rest of the world. Some of the regions largest heavy-duty markets, such as Egypt, have old vehicle fleets, which are key factors in the ongoing use of monogrades. There are few signs of that changing in the short term, even with the Egyptian economy seeing the fastest growth rate in a decade. Commercial vehicles account for around 25 percent of the countrys total vehicle fleet, according to Kline data.

Indeed, the age of the Egyptian vehicle parc is the reason SAE 50 and 40 monograde oils total more than 70 percent of the countrys market, Klines project manager Sushmita Dutta said at the Base Oil and Lubes Middle East Conference in Abu Dhabi in April.

The countrys harsh climate and dusty conditions are also helping to prolong the use of monogrades. Silica ingress and high ambient temperatures habituate short oil drain intervals, reducing some of the benefits of using more expensive, higher quality oils.

This monograde scenario does not apply evenly across the Gulf. In Bahrain, Kuwait and Oman, for example, Kline data suggest that the majority of heavy-duty engine oils demand is for SAE 15W-40 grades. The country with the largest commercial vehicle fleet in the region is Qatar, at 40 percent, but where only roughly 10 percent of HDEO demand is for monogrades. The size of this fleet may be accounted for by the major infrastructure projects, including building stadia for the 2022 World Cup.

According to the World Bank, the average age of a Cairo taxi is more than 30 years, more than 64,000 microbuses are older than 20 years, and nearly 70 percent of all registered vehicles are older than 15 years.

Parcs and Regulation

In Saudi Arabia, an erstwhile monograde market, regulations are forcing through change that will resonate throughout the Gulf, said Rajeev Sivaraman, technical services manager at Jeddah-based Petromin Corp. He points to the Gulf Standard Organizations introduction of API CH-4 as the minimum benchmark for heavy-duty oils.

This has come in to force this year, which resulted in [the] withdrawal of monogrades from the GCC market – so monogrades, which used to constitute around 51 percent of the HDDO [market] have disappeared and been replaced with multigrade oils, the most popular being 15W-40, Sivaraman said.

Set up by the Gulf Cooperation Council and headquartered in Riyadh, Saudi Arabia, the Gulf Standard Organization is a pan-Gulf body charged with unifying standards, although critics say it lacks powers of enforcement.

The conversion to multigrades is also sped along by the opening in recent years of several base stock plants in the region that produce API Group II and III base stocks. Until then, the region produced almost entirely Group I oils. These plants include Luberefs Group II refinery in Yanbu, Saudi Arabia, Bapcos Group III plant at Sitra, Bahrain and the Shell-Qatar Petroleum Pearl GTL Group II and III plant in Ras Laffan, Qatar.

Cars Trouble

The regions disparity with global lubricants trends is even more noticeable in the passenger car motor oil sector, where heavier oils remain prevalent. Kline estimates 20W engine oils account for an astounding 65 to 70 percent of the Middle Eastern market, which the consultancy estimates at approximately 400,000 to 500,000 t/y. That compares with a global figure of just 1 percent, according to Infineum.

Yet even in a sophisticated automobile market like the United Arab Emirates, higher viscosity 20W engine oils represent more than 60 percent of the market. More highly developed markets such as those in the European Union, Japan and the U.S. adopted 10W grade oils decades ago, moved onto 5W oils and are now rapidly embracing 0W.

As in the heavy-duty market, high ambient temperatures and a reluctance by consumers to accept the qualitative argument in favor of higher specification oils have sustained heavy oil consumption in the Gulf.

Sanjay Singh, head of lubricants and greases for the Middle East and North Africa at U.A.E.-based energy company GP Global, said historically cost has also been an important determining factor of the slow conversion to lighter oils.

Original equipment manufacturer service was quite expensive. Most vehicle [owners], when out of warranty, chose to go to independent garages or fuel stations for oil and filter change. These garages, keeping in mind the drain period being recommended by OEM service centers, also looked at 20W-50 only, he said.

In some cases, independent garages have recommended drain periods as low as 2,000 kilometers, Singh added. The average distance traveled per year by a car in the U.S. is 19,300 km, so this would be the equivalent of an oil change every five and a half weeks.

Klines overall findings highlight the fact that the region continues to lag behind other emerging markets and is substantially behind the aforementioned developed markets where monogrades and heavy motor oils account for small proportions of the market. Nevertheless, the Middle East is gradually tilting towards better quality lubricants, driven by OEM recommendations that prescribe lighter oils for new vehicles.

Most OEMs are now recommending a 10,000 km drain period and are the main drivers for 10Ws and 5Ws starting to pick up volumes, Singh said.

Even as the region starts to shift to better quality oils, the trend could be slowed by geopolitics. Expectations that Iran would reemerge as an important auto manufacturing hub are likely to be dashed with the snap-back of U.S. sanctions on the automobile sector in August and further sanctions on the oil sector in November.

APIs CH-4 specification was introduced 20 years ago. It covers high-speed, four-stroke diesel engines that are designed to meet exhaust emission standards in 1998.

Since the easing of the last round of sanctions, Iran had been able to import higher quality base stocks and that has been reflected in a rise in the use of multigrade lubricants, although monogrades still account for around half of the market. Domestic Group I base stocks are expected once again to be the main supply source for the Iranian lubricants market amid renewed political tensions with the U.S. At production capacity of 1 million t/y, Iran is the regions largest producer of Group I base stocks, according to LubesnGreases 2018 Global Guide to Base Oil Refining.

Market Outlook

Even though the Middle Easts lubricants market has been dented by depressed oil prices for the past few years – income upon which many of the regions hydrocarbons-dependent economies rely – it has seen steady industrial and commercial sector growth, accompanied by rising vehicle sales and economic diversification.

Meanwhile, restraints on demand for finished lubricants include the expanding use of synthetics due to the growing number of luxury vehicles on the roads, a focus on greater energy efficiency in a region where hydrocarbons use is heavily subsidized, increased drain intervals and dwindling monograde use, according to Dutta.