Invest in Saudi’s downstreamFebruary 4, 2016
Company president Zafar Talpur talks to TOGY about Saudi Arabia’s downstream potential and areas of expansion, as well as the impact of lower oil prices on the petrochemicals sector. While the upgrade of its refinery from group 1 to group 2 base oils will be completed by the end of 2015, Fuchs Petroleum is investing heavily in its manufacturing plant to enhance automation and boost production capacity.
How attractive is the downstream market in Saudi Arabia?
The downstream market is quite lucrative in Saudi Arabia and the government, particularly the Saudi Arabian General Investment Authority, is encouraging more investments in this sector. The government promotes foreign investment because it wants foreign companies to come here, invest, bring technology and train the local workforce.
This is a good way of developing the quality of the businesses and local labour. Saudi Arabia’s market has a very friendly and incentive-oriented investment policy.
Which downstream products is the government investing in?
Products with specific applications in industry are in demand. Regulations in Europe, the US and other countries make it mandatory to use these types of products in the automotive business as well as food-related industries. Saudi Arabia is still new in its compliance with regulations in this regard, but is moving fast with their implementation.
Saudi Arabia will have soon doubled its capacity for producing base oil lubricants and other high- quality products, enabling the industry to increase exports of value-added products. This is also in the country’s best interest as value-added exports provide more opportunities for other industries such as packaging, additives and transportation, to which such services are integrated into manufacturing and delivering products.
How does Saudi Arabia stand out in the petrochemicals and chemicals market?
When you look at the lubricant market worldwide, the industry is saturated. European countries show a low or negative growth in this segment. The products in the market are now of very high quality, so change intervals have extended.
Even though the amount of vehicles is rising and the industry is growing, consumption is not increasing because of these elongated change intervals. There is not much growth percentage-wise. In Saudi Arabia, North Africa and the Middle East, there is an expected 5% growth by 2020, which is good in the lubricant industry as worldwide growth is expected to be in the 3% range over the same period.
What progress has been made in improving efficiency and quality standards?
The Saudi Standards, Quality and Metrology Organisation is working very closely with the oil industry. The industry is in the process of improving the quality of lubricants available in the market, which is moving from mineral to synthetic lubricants. Having a more efficient engine design for less fuel consumption yet more environmentally friendly is one of the driving forces behind this. The Saudi Standards, Quality and Metrology Organisation is also working on this. It is coming up with the standards to improve fuel efficiency and the quality of lubricants as well as reducing pollution.
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