Middle Eastern lubricant markets have been resilient in the face of the regions political and social volatility. This means growth opportunities for suppliers, SJK Marketing Services Director Steve King said at Septembers ACI European Base Oils and Lubricants conference in Prague.

Iran, with demand of 700 million liters in 2011, is the regions biggest lubricants market, followed by Saudi Arabia (360 million liters) and Iraq (175 million liters). Other Middle East countries such as United Arab Emirates, Yemen, Syria, Israel and Kuwait consumed between 50 million and 70 million liters, King said. Lebanon, Jordan, Oman, Qatar, Bahrain and Palestine ranged between 15 million and 37 million liters.

Irans market is characterized by demand for very low quality. It is quite an insulated market with very small involvement from global lubricants majors, King told the conference. Saudi Arabia added 60 million liters from 2009 to 2011, he added, primarily due to population growth, increases in car sales and some degree of industrial development. Iraq is still recovering from the war, and its lubricants market can be quite unpredictable.

Israel is the regions most sophisticated and most Europeanized market and consumes high quality products. Practices in Israel tend to be more Western, with drain intervals longer than the rest of the region, said King, who is based in Swindon, Wiltshire, U.K.

All these countries are expected to grow in the next five years at an average rate of 2.5 percent annually, he noted. Saudi Arabia is expected to consume 407 million liters of lubricants by 2016. U.A.E. is expected to grow to 87 million liters, while Qatar is slated for growth of up to 27 million liters by 2016. Qatars lubes demand is expected to grow further because of infrastructure development that will be necessary to host the 2022 World Cup football championship, according to SJK.

Countries such as Saudi Arabia, U.A.E. and Lebanon are dominated by passenger car motor oils, while Yemen and Jordan are dominated by heavy-duty motor oils. Saudi Arabia has a fairly even balance between consumption of PCMO (175 million tons) and HDMO (165 million tons).

SJK pointed to three countries as representative of the quality of PCMO consumed in the region. Yemen has the lowest share of high quality lubricants – only 2 percent of the total consumed product mix are synthetics and semi-synthetics. The rest is multi- and monograde lubes made with mineral oils. The share of synthetics and semi-synthetics in Saudi Arabia is a little higher at 5 percent. In contrast, around 20 percent of the lubricants consumed in Lebanon are premium quality products.

In the HDMO product mix, the Middle East consumes very little premium lubricant, with monogrades holding the biggest market share. In the U.A.E. and Saudi Arabia, for ex-ample, synthetic HDMOs have a 1 and 2 percent share, respectively, of the total product mix.

Depending on the country, the Middle East can expect lube demand growth rates of 1 to 4 percent annually, King said. The rate is driven by three major factors. First is high population growth, which leads to increased vehicle sales and gross domestic product. There also is ongoing industrialization of Saudi Arabia, he said, adding that the country has built six major new industrial cities.

The second trend is an upward shift in product quality. However, he warned that this region is notorious for counterfeit products with people blending and selling lubes either as low quality products or counterfeiting global brands.

The third major trend is that the Middle East is generally a do-it-for-me market. Quick lubes are also developing very well, and many competitors are opening fast lube chains, King said.

Finland, L&T Partner on Recycling

Finlands Ministry of Environment is partnering with used oil collector Lassila & Tikanoja to arrange nationwide waste oil management services under an agreement that goes into effect in 2013. The five-year contract involves the collection of used lubricating oil throughout Finland and transporting it to be processed for reuse. According to the announcement, the nation generates 30,000 metric tons of waste oil annually.

Under the agreement, Helsinki-based L&T will collect all waste oil batches exceeding 200 liters. Currently, the minimum limit for the free-of-charge service is 400 liters. The collected oil will be reused or refined into new oil products.

We believe that over 90 percent of the material can be reused, mainly in the form of rerefined base oil, said Jorma Mikkonen, L&Ts director of corporate relations and responsibility. The degree of rerefinement will be improved by enhancing the preprocessing of low-quality batches.

L&T owns a 20 percent stake in EcoStream Oy, operator of a rerefinery in Hamina, Finland, and is one of the main suppliers of used oil that serves as feedstock for that plant.

Delfin USA Export Ban Lifted

The U.S. Department of Commerce opted not to renew a prohibition against Delfin Group USA exporting motor oil and other lubricants, but the company says it will wait some time before sending products overseas, especially to the Middle East. I made a commitment that I am not interested in doing business with the former presidents partners in the U.A.E., Saudi Arabia or wherever else these products might have gone, President John Gordon said.

He was referring to charges filed in May against the company and his predecessor, Markos Baghdasarian, alleging the sale and export of aviation oils and polymer to Iran in violation of U.S. sanctions. The legal case against Baghdasarian is pending, and Delfin still faces penalties, but the Commerce Department reported it would not try to renew a temporary export ban imposed in February. As a consequence, Delfin legal counsel concluded that the company is permitted to resume normal domestic and international trade that complies with U.S. law.

Gordon said Delfin hired a compliance officer and adopted procedures to ensure it follows export provisions of the Patriot Act. He asserted, though, that the company will buy and sell only to American companies for the foreseeable future.

Oronite Uses Interteks China Labs

Chevron Oronite increased its analytical testing capabilities in China by signing an agreement with Intertek Group PLC to use Interteks testing services and laboratory in Shanghai. The addition of the Shanghai testing facility is part of a longer term strategy for China that supplements Chevron Oronites other technical support and research network around the world, including our technology center in Japan, which has a full range of laboratory and engine test facilities Jirong Xiao, vice president, products & technology, Chevron Oronite, said.

The facility, which is already in use, will initially focus on enhancing Oronites customer service while improving its ongoing in-country field testing efforts. A company spokesman said that typical services provided in the new lab will include oil sample analysis for quality control purposes.