In 2007, the road to Jeddah seemed paved with gold after Gulf Oil Internationals newly forged joint venture with Dabbagh Group paid U.S. $200 million (153 million) for the assets of Petromin, a lubricant blender previously owned by Saudi Aramco and ExxonMobil. In 2009 when this magazine spoke with senior management, the talk was of a $1 billion initial public stock offering, so bullish was the joint ventures outlook.
How times have changed. Last year rumors began circulating the partners were having differences over strategy, a euphemism that often signals a business is in difficulty. Gulf Oil is reportedly now close to selling its 49 percent holding in a deal that could be valued at $700 million. The rumors say Dabbagh Group will buy out Gulf Oils stake in the 300,000 t/y business, making Petromin a wholly-owned Saudi Arabian company for the first time since it was founded in 1968.
So what went wrong? The precise details may never be known, such is the hushed corporate environment in Saudi Arabia. However, the rift highlights the fact that Middle East lubricant companies can have significantly different strategies and also how growth has emboldened their ambitions. It is also a warning to interna-tional companies of the complex and inherently more conservative business culture in the Middle East. Historically, international companies typically contributed technical or marketing expertise, but as national oil companies inject more resources this is no longer the template modus operandi.
Takreer, which took over the refining operations of Abu Dhabi National Oil Co. in 1999, will commission a 500,000 t/y API Group III base oil plant in Ruwais, United Arab Emirates, by year end. Originally it appeared that Takreers partner, Finnish refiner Neste, would market all of the base oil, just as it does for another base oil joint venture with Bapco in Bahrain. But the notion of Neste marketing all of the Ruwais output looks in doubt following Aprils Base Oils and Lubricants Middle East conference, organized in Abu Dhabi by the Conference Connection and Petrosil. Adnoc officials there stated that Adnoc will be responsible for marketing.
Back in Saudi Arabia, Luberef has announced a $1 billion dollar upgrade and expansion of its base oil plant in Yanbual Bahr, with no sign it intends to enlist an international partner. Jointly owned by Saudi Aramco and Jadwa Industrial Investment, it recently overhauled its corporate identity and announced a major international sales push.
Many are predicting the Middle East will become a major supply hub for Group III base oils. With greater exposure to international markets and rising confidence, all the signs are that Gulf refiners and lubricant companies will look harder at the strategic necessity of partnership arrangements in the future.