The base oils and finished lubricants sectors are likely to be early beneficiaries, as both have been starved of investment for years as sanctions were tightened. If the opinion of this Iranian source is any indication, the countrys refiners are gearing up for a post-sanctions push back into international markets.

Irans five base oil refineries have a combined capacity of 1.0 million metric tons per year – all of it solvent refined API Group I. Sources agree the countrys finished lube market is by far the largest in the Middle East, amounting to over one-third of the regions total. Fuchs Petrolub currently ranks Iran as the ninth largest lube market worldwide, but it is marked by very low-quality products. As a result, Irans refiners look poised for a major shake-up as the sector repositions itself for the future.

While opinion is divided on whether a final deal will be reached, industry observers agreed that the base oils and lubricants sector will see a torrent of new joint ventures as Iran seeks access to new technology and investment in the refining sector. There is also pent-up demand for additives, they said, so global suppliers will have access to potentially the biggest additive market in the region. While some in the industry urge caution, Iranian refiners are optimistic that a deal to lift sanctions will be done.

The struggle between those who want a deal and those who do not is sure to intensify, but the prospect of a market of nearly 80 million people is certainly enticing. The critical issue, our reporter was told, will be the pace at which sanctions are lifted.

Doubts surrounding a final agreement add volatility to markets at a time when base oil profits are being squeezed. Uncertainties abound, not the least of which is how refiners and marketers in the Middle East can separate business from politics in a region where the two are often intertwined.

– Richard Beercheck

Dick@LubesnGreases.com