The European market is quite different from the Middle East, and both are quite different from Africa. It is even misguided to assume uniformity within any of these regions. For example, the South African market operates in a completely different way from West and North Africa due to a long list of factors including differences in base oil supply situations, the make-up of their respective economies and varying levels of government involvement.

This is even more true in the Middle East, which has an especially fragmented base oil market. People often think of this regions base oil supply as existing only around the Persian Gulf, but countries such as Syria, Jordan and Saudi Arabia have separate supply scenes. Other factors such as weather, logistics, population concentrations and differences in levels and type of demand further fragment the market.

Demographics play a large part in distinguishing the base oil supply scenes in different Middle Eastern countries. Nations such as the United Arab Emirates and Syria have relatively dense populations, while Saudi Arabia and Yemen have vast deserts with concentrations of population few and far between.

These differences have tremendous effects on the logistics for base oil supply into these regions. In the Levant countries of Syria, Lebanon and Jordan, most base oils are imported by sea. In contrast, domestic production in Israel and Saudi Arabia makes those countries almost self-sufficient. Iran has a market which has attempted to establish self-sufficiency, but outdated transport infrastructure causes logistical problems that hamper handling and distribution, keeping suppliers from being truly national and inhibiting exports. Further complications from political pressures have only exacerbated these problems.

Of course, the region has had decades of political volatility, and this has played a monumental part in shaping some of its base oil markets. Iraq once produced large volumes of base oils at refineries operated by the countrys Oil Ministry, but it now relies heavily on imports that come from or pass through Turkey, Uzbekistan, Syria, Jordan, Europe and Saudi Arabia.

Talks abound at the moment of plans to resume domestic production. The countrys massive reconstruction program seems to be creating an opportunity for one or more projects. This would go a long way to rebuilding the countrys ability to meet domestic requirements and could also upgrade Iraqs capacity to include API Group II and Group III oils. Given the amount of foreign investment available, a rebound in Iraqs base oil production seems likely.

The Middle Easts base oil market has been uniform in one respect: To date, virtually all of the production within the region has been Group I. But that is now set to change as well. With large Group III plants about to be commissioned in Bahrain and Qatar, the region will rapidly become a hub of production for both conventional Group I and more highly refined base oils.

Lubref has announced that its Group I plant in Yanbual Bahr, Saudi Arabia, will construct an additional unit to produce Group II base oils, and there are rumors that parties within the U.A.E. may appraise the building of new Group I facilities to cover local requirements.

The addition of so much capacity will perhaps remove reliance on imports from Europe and the Far East, which have been traditional suppliers of base oil for the Middle East. Indeed, many observers say a fundamental role reversal is taking place, with the Middle East Gulf preparing to become a net exporter of base oils rather than net receiver.

Another important aspect of the Middle East region is that demand for automotive and industrial finished lubricants is generally increasing both within the region and in adjacent markets such as India and East Africa. This creates growth opportunities for lube blenders within the Middle East, which in turn could mean greater local demand for Middle East base oil producers. To the extent that blending occurs in neighboring areas, base oil export opportunities could increase.

The general business outlook for the Middle East seems positive. Growth in this region was briefly stymied by the global downturn of 2008, and the subsequent fiscal problems in countries such as the U.A.E. cast long shadows over some otherwise vibrant and developing economies. Resilient as ever, this region has dug in. Base oil projects which were proposed prior to 2008 have not been abandoned, nor even postponed. Rather, in some cases they were financially boosted and brought forward, fortuitously taking advantage of tight conditions in the global market.

Of course, political threats persist. Governments in several countries, including Yemen, Syria and Bahrain are still under pressure, and there is always danger that conflicts may impede progress within the region. All in all, however, the situation for the regions base oil scene seems to be improving. A market for so long fragmented appears to be turning dynamic. Can it be both? Probably, because it is hard to imagine anything in the Middle East becoming uniform. In any case, the regions base oil market is certainly one to keep an eye on.