Chemlube Pens Exclusive Europe Sales Deal for ADNOC Base Oils

Chemlube will be the exclusive European distributor of Group III base oils from Abu Dhabi after signing a deal with producer ADNOC on Wednesday, the pair of firms revealed at a gala dinner hosted at the ICIS World Base Oils & Lubricants conference.

The deal lasts for three years with an optional extra year, according to a source familiar with the matter.

ADNOC's deal with the US-headquartered base oils distribution business is similar to one already established for Abu Dhabi material in the US, which has Penthol as sole American distributor.

The high-quality base oils with a viscosity index (VI) of 131 is already sold in Europe.

ADNOC material is known as "unapproved" or "non-approved" in Europe because it has not met requirements stipulated by major car original equipment manufacturers (OEMs).

Approvals in the US are believed to be on the cards, following typical approval processes with testers and additive companies.

Achieving approvals is an expensive process, particularly in Europe, estimated by one industry source privately to be around €20m for European standards.

The stringent requirements are demanded by a number of car makers for their engine oils, both for those put into new vehicles before they are sold and for their recommended consumer oils.

Lubricants blenders can use up to 15% of unapproved Group III base oils mixed with approved, to make their final products, according to one source familiar with the matter.

Group III supply which is unapproved and in some cases rivals approved product in terms of quality has grown with the entrance of Abu Dhabi- and Russian-origin material.

Ample supply has brought down prices for non-approved, driving a wide wedge in the spread of prices for differently approved Group III for much of 2017, continuing into 2018.

"I'm pleased to announce another exclusive agreement with Chemlube to be sole seller for Europe," said Abdulla Salem Al Dhaheri, Director for Marketing, Sales and Trading Direcorate.

ADNOC's base oil plant has a capacity of 500,000 tonnes/year of Group III and around 100,000 tonnes/year of Group II.

The 22nd ICIS World Base Oils & Lubricants Conference in London runs from 21-23 February.