How can the lubricant industry prepare as government programs create opportunities for commercial and industrial lubricants in the Middle East?
The Gulf Cooperation Council is undergoing a period of economic development fueled by massive national development programs which are overhauling the economies of the region. Often styled as “Visions” and with a focus on reducing dependency on oil and gas, these programs include structural reforms and infrastructure megaprojects which present significant opportunities for lubricant suppliers, driven by surging demand for lubricants in both the automotive and industrial sectors. While each country in the region has its unique market dynamics, the overall growth in infrastructure projects and the need for lubricants across various sectors are creating a promising market landscape. Discover detailed information about the opportunities to be found in this region, rich in potential, as outlined in Kline’s upcoming report, Global Lubricants: Gulf Cooperation Council.
Saudi Arabia
Saudi Arabia, the largest economy in the Middle East, is experiencing rapid economic growth, propelled by high global energy prices. The Saudi government has used this windfall to implement significant large-scale public infrastructure construction projects tied to the Vision 2030 plan, such as the NEOM and Red Sea projects, driving the demand for commercial automotive lubricants, already the largest segment in the Saudi finished lubricants market. But demand for lubricants in Saudi Arabia is expected to grow across all sectors. These reforms are expected to drive demand in the kingdom in three key areas:
- Off-highway commercial automotive: The Red Sea project, located along the western coast of Saudi Arabia, encompassing an area of over 28,000 square kilometers, includes the development of artificial islands, luxury resorts, residential areas, leisure facilities, and an international airport. NEOM is a planned futuristic city located in the northwest of Saudi Arabia. Building the infrastructure for the megaprojects is strengthening demand for off-highway lubricants used in construction machinery, including Heavy-duty motor oil (HDMO), grease, automotive gear oil, and hydraulic and transmission fluids. Shell and FUCHS, among others, are already supplying contractors in the NEOM and Red Sea projects with large amounts of lubricants. Requirements for lubricants are still growing and construction firms are looking for partners.
- On-highway commercial automotive: the Saudi government has launched an economic zone in Riyadh named “Special Integrated Logistics Zone,” a 3 million square meter area that will include integrated logistics systems to streamline cargo movement. The zone will help increase the country’s cargo capacity to more than 4.5 million tonnes annually. The establishment of new logistics zones will further increase demand for commercial automotive lubricants for on-highway usage. For-hire fleets play a crucial role in goods transport: industrial activity in the country is more concentrated in the eastern and western areas of the Kingdom, far away from densely populated cities such as Riyadh and Jeddah, and the primary connections are by road. Lubricant demand for freight activities is expected to continue growing at a fast pace into the next ten years.
- Industrial oils and fluids: the Industrial lubricants market in Saudi Arabia is experiencing steady growth largely due to efforts spearheaded by the public sector to develop the Kingdom’s non-oil sectors. The country has a burgeoning power generation sector and a developing manufacturing sector, with various industries such as automotive manufacturing, construction, and mining poised for robust growth within the next five years. The Saudi Government has established the Saudi Industrial Development Fund to promote investment into the Kingdom’s industrial sectors. The National Industrial Clusters Development Program (NICDP) aims to develop the Saudi Arabian Automotive Industry OEMs, with the target of producing more than 300,000 vehicles in the kingdom by 2030. The increasing industrialization in Saudi Arabia will drive future demand for hydraulic fluids, gear oils, grease, and metalworking fluids, among others.
United Arab Emirates
The United Arab Emirates, the second-largest economy in the GCC, enjoys a strategic location that connects Asian, European, and African markets, making it a prominent trade hub. The UAE Vision 2030 and Abu Dhabi Economic Vision 2030 include the expansion of Khalifa Port, Fujairah Airport, and Sharjah International Airport. Other large construction projects in the pipeline include the TA’ZIZ industrial complex, Moon Dubai, Guggenheim Museum, Meydan One Mall, Ciel Dubai, and Atlantis The Royal, among many others. The construction megaprojects are expected to boost demand for off-highway commercial lubricants. The commercial vehicle sector in the country is already experiencing strong growth. Additionally, the development of transportation infrastructure, including dedicated lanes for taxis and buses, metro lines, light rail lines, and a bus rapid transit system, will promote public transport usage and create opportunities in the transportation sector.
Oman
Oman, among the GCC members, is expected to have the strongest GDP growth. The country has implemented liberalization and economic diversification reforms as part of its “2040 Vision Plan”. The transportation network in Oman, including buses and private taxis, is being expanded, with plans to privatize the national bus and ferry networks. The demand for HDMO is already relatively high due to short drain intervals for engine oil in the on-highway segment, since the hot and arid climate in the region has led to the continued use of thicker viscosity oils by mechanics, a trend which has been observed in other countries in the region. The country’s industrial base in Duqm is also undergoing expansion, boosting future industrial lubricant demand in the country.
Kuwait
Kuwait’s National Development Plan and ongoing infrastructure projects create significant opportunities for the commercial automotive lubricants market. In 2023, the government sanctioned nearly USD 3 billion for 110 infrastructure projects, including the expansion of Kuwait International Airport, the development of the Silk City, the construction of Kuwait metro, and the establishment of a railway network across the nation. Jaber Al Ahmad New City aims to accommodate around 80,000 people. The Kuwait National Rail Road project, part of the GCC railway network, is expected to connect Kuwait with other GCC countries, requiring lubricants for both the construction and operation of the railway system. The commercial segment in Kuwait is one of the largest and most dynamic segments of the lubricant market. Sales of new commercial vehicles in particular, have shown substantial growth with a CAGR of around 8%.
Qatar
In 2022, Qatar witnessed a surge in lubricant demand during the FIFA World Cup construction activities. Despite the completion of most projects in 2023, the commercial segment is expected to continue expanding, driven in part by the Qatar National Vision 2030.
Kline’s upcoming report, Global Lubricants: Gulf Cooperation Council report addresses these and other pressing issues affecting the GCC market. The report provides a view on lubricant demand for each country, with forecasts to 2028 and 2033, and identifies market trends, opportunities, and challenges including the most recent developments in sustainability and electrification. The research focuses on markets where growth opportunities can be expected in terms of countries and applications. The report also includes an overview of leading lubricant marketers in each country covered.
For further insights into the impact of government programs on lubricant consumption in the Middle East, refer to our GCC Market Analysis and Opportunities report, part of the Global Lubricants Series. This valuable resource helps subscribers identify opportunities for revenue growth, recognize barriers to growth, develop strategies to overcome them, and evaluate leading suppliers active in the region. It also provides insights into opportunities for mergers, acquisitions, and alliances. To learn more, please contact us.
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