Oman Oil Marketing Co. was formed in 2003 following the acquisition of the majority share of British Petroleum Oman by Oman Oil Co. and is responsible for the newly established domestic lubricants business. According to analysts, the lubricants market in Oman is fragmented and unorganized but is dominated by three oil marketing companies, Al Maha Petroleum, Shell Oman and Oman Oil.

Oman Oil is not new to the lubricants business and has been exporting to a few countries for the last six years, although the decision to widen its international reach will not be without challenges, industry observers say. It will also need to demonstrate a well thought out strategy as the company is also the sole distributor for BP and Castrol lubricants in Oman.

New Launch Amid Fierce Competition

Oman Oil Marketing enters the Omani lubricants market at a time when competition is intense. With over 30 brands in the market, many originating from the United Arab Emirates, the sector is characterized by high volumes and low margins. The company is focusing on the passenger car motor oil, heavy duty engine oil, marine and industrial segments, a market it estimates to be 36,000 metric tons per year. That is relatively small compared with other regional markets such as Saudi Arabia and the U.A.E., implying it will look to other markets to sustain profitability. Oman has strong growth fundamentals and favorable demographics which should benefit oil marketing companies in the medium term.

Philippe Raynaud de Fitte is the executive vice president for Oman Oils downstream business, which oversees the strategy of the marketing company and a number of other businesses. In answer to a question from LubesnGreases, de Fitte said the company is targeting the Middle East, Africa, Far East and Southeast Asian markets as part of its expansion plans. T. R. Kumar, managing director of Tesla lubricants in the U.A.E., said that will be a tough test. They are using a blender in the U.A.E., and I think they will find competition very intense.

Stefan Mueller, senior principal analyst at IHS Chemical agrees. The challenges in their home market will be small. But given the size of this market, they have to export to get a certain critical mass. Outside the country the competition is fierce – it wont be a walk in the park.

Earlier this year, Oman Oil Marketing acquired a 40 percent stake in U.A.E. based Lubechem International Industrial, a manufacturer of a range of greases, automotive, industrial and marine lubricants in a deal said to be worth in excess of U.S. $400,000. The company describes its relationship with the U.A.E. blender as a joint venture and said the acquisition will enhance its vertical supply chain integration.

That will ensure continuity of supply says Gulf Baader Capital Markets, an investment advisory firm in Muscat. However, Shell Oman has a distinct advantage in the lubricants segment because it is the only company in the country with its own blending plant that supplies the local market and also exports finished lubricants to other markets.

According to Gulf Baader, Shell Oman remains the market leader with a 40 percent share and earned 37.8 million Omani rials from lubricant sales in local and export markets in 2013. (One Omani rial is approximately equivalent to U.S. $2.60.) The other major lubricants competitor is Al Maha Petroleum, which has an agreement with Total and has carved out a strong position in the commercial automotive sector.

Product Range

Oman Oils lubricants range includes Optimo passenger car motor oil, developed to provide power and performance and Maximo, a diesel brand catering to commercial vehicles. Also under the Oman Oil banner are Marino oils specifically developed for fishing and leisure outboard engines and a range of lubricants that includes the Cool Guard, Gear Guard, Power Guard, Speed Guard and Friction Guard brands.

The minimum specifications in Oman are API SL and CF/CF4. The company has formed its own technical team to look after original equipment manufacturer approvals said de Fitte, suggesting the company is not pursuing a separate marketing agreement with an international partner.

Since 2009, all oil marketing companies in Oman are required to pay a license fee of 0.004 baiza (one thousandth of a rial) to the Omani government for every Omani rial earned. The fee has put pressure on margins, according to Gulf Baader, which believes the impact on the lubricants segment has been substantial. Prices in the retail and commercial segments are determined by the oil marketing companies, while prices in the aviation and marine lubricant segment are influenced by international market prices. Even so, given the competitive environment, there appears to be little opportunity to pass the extra charges to the customer.

Against the backdrop of a buoyant economy, the steady rise in the automotive market and increases in the expatriate community, the retail segment is proving to be the backbone of Oman Oil Marketings business. There are approximately 450 filling stations nationwide, which are the main battleground for the three major oil marketing companies. Similarly, the governments drive to diversify away from dependence on oil is resulting in major infrastructure projects that are likely to bolster sales of industrial lubricants as the economy evolves.

Oman Oil sources its base oils from Europe and Asia according to de Fitte. Oman has two fuel refineries at Mina al Fahal and Sohar with a total nameplate capacity of 222,000 barrels per day. Sohar was designed to process a mixed feedstock of Oman crude oil and atmospheric residue. According to the U.S. Energy Information Administration, there are plans to upgrade the Sohar facility by 200,000 bbl/d as part of a U.S. $1.5 billion project.

Synthetic Lubricants

Oxea, the Oberhausen, Germany, chemical giant is possibly better known as a major producer of synthetic fatty acids and carboxylic acids. However, its range of carboxylic acids has several applications for synthetic industrial lubricant producers, a market that is expected to reach 41.52 million tons in 2018, according to estimates by Transparency Market Research. The total synthetic basestock market is still small and accounts for just 4 percent of global base oils business, compared with 91 percent for hydrocarbon base oils, which includes API Group III stocks, according to data from Oxea.

Of the total market, 42 percent are polyalphaolefins, 32 percent esters and 13 percent polyalkylene glycols. The remainder of the market comprises phosphate esters, silicones and other specialities. Oxea claims the largest application for synthetic lubricants is in the automotive sector, which consumes 48 percent. The industrial segment, which includes rolling oils, hydraulic fluids and other specialities, accounts for 33 percent, aviation 13 percent and compressor oils 6 percent.

IHS Chemicals Mueller agrees that the synthetic lubricants market is poised for growth. The synlube market is interesting and growing faster than conventional lubes, but the Middle East and Africa still lag behind when it comes to synlubes. He is cautious about how much the Oxea acquisition will benefit Oman Oil. The Oxea acquisition does not help their current business as Oxea is not producing lube esters. Oxea told me production of plasticizers is more attractive and they dont want to compete with their customers who buy specialty acids to produce lube esters.

Oxeas polyols, alcohols and carboxylic acids are used in the production of dibasic-, monobasic- and neopolyolesters. These synthetic esters serve as the basestock for a variety of lubricant applications, including heat transfer fluids, metalworking fluids and corrosion inhibitors.

The company supplies raw materials in the form of mono acids and polyols for use in basestocks to companies such as Chemtura, Croda, ExxonMobil, Inolex and STPC. It also supplies the mono alcohols that produce polyalkalene glycol, polyalphaolefin and polyvinylether base oils. Lubricant and additive manufacturers such BP/Castrol, ExxonMobil, Fuchs, Kluber and Lubrizol use this technology. Oman Oil claims Oxea has partnered with a number of lubricant producers to provide customized ester solutions in key lubricant markets.

North America accounts for 58 percent of Oxeas synthetic lubricant business, Europe 36 percent and Asia 6 percent. Polyolesters have the widest number of synthetic lubricant applications, including automotive, aerospace, industrial and power generation. Oxeas alkylamines, produced at two plants in Germany also have applications as corrosion inhibitors in synthetic lubricants and metalworking fluids.

Oxea claims its products provide performance advantages over other esters such as higher miscibility, thermal stability and viscosity. Neopolyolesters using Oxeas carboxylic acids are recommended as basestocks for synthetic lubricants requiring specific performances characteristics the company says.

To meet growing demand in the synthetic lubricant market, Oxea has expanded production capacity for both carboxylic acids and polyols. The latest capacity addition was a new carboxylic acid plant in Oberhausen completed in the second quarter of 2013.

Despite the large automotive markets in the Middle East, technological development in the market for synthetic lubricants is low, which is not surprising given the regions large hydrocarbon reserves. However, analysts say that Oman Oils purchase of Oxea could signal the companys intention to push into the Middle East.

New Markets, New Frontiers

Aside from the stated challenges and intense regional competition, Oman Oil looks well positioned to take advantage of the changes in the regional geopolitical environment. The most obvious examples are the increasingly closer political and trade ties with Iran, a massive potential market for lubricants and lubricant technology. If, as expected, current negotiations with the United States produce a further easing of sanctions, Oman is likely to be an early beneficiary. It has already been actively engaged in trade talks in a number of key economic areas.

The lubricants market in the Middle East is fast becoming a commodity business because technical standards generally lag the U.S. and Europe. The region also has unique climate conditions, which is where Oman Oil Marketing could capitalize and introduce new products with higher specifications using technology developed by Oxea. Combined with opportunities presented by countries such as Iran, the company could be better placed than most