ExxonMobil pulls out of Aramco venture

ExxonMobil has sold its stake in a Saudi lubricant firm to a local consortium, in the second transaction this month that has seen the US firm pull out of a joint-venture with state oil giant Aramco.

Saudi Advanced Petroleum Services (APSL), a consortium of the Dabbagh Group and the Gulf Oil International Group, has bought the Saudi Arabian Lubricating Oil Co. (Petrolube) from Aramco and Mobil Investments, an affiliate of ExxonMobil, financial adviser Swicorp said in a statement.

Petrolube was a joint venture between Aramco, which owned 71% of its shares, and ExxonMobil, which owned the remaining 29%, Swicorp said.

It did not say how much APSL, the licensee of US-based Gulf Oil Lubricants in Saudi Arabia, has paid for the transaction, however people familiar with the deal expected the figure to be more than $133 million.

Simon Rowe, Swicorp's managing director, declined further comment.

Adil Al-Tubayyeb, vice president for Joint Venture development at Saudi Aramco, said in a statement that local Saudi companies are now capable of taking over the lubricants market in the country after heavy involvement over the past 30 years.

“The time has come for clearing the way for the private sector to takeover fully the management and operation of this industry,” said Al-Tubayyeb whose company owns 71% of Petrolube.

Analysts say the two oil giants are gradually exiting the lubricants market to focus on other ventures including the Saudi Aramco Mobil Refinery Company (Samref) and the Fujian Refining and Ethylene Joint Venture Project in China. Exxon, Aramco and China’s Sinopec are working together to expand the Fujian refinery to 240,000 bpd from 80,000 bpd and build a petrochemical plant at the site.

Petrolube president and CEO Salem Shaheen told a Saudi daily his company had reached an agreement with APSL for the latter to maintain employee benefits following the takeover. APSL agreed to pay fair compensation for any workers it might lay off.

ExxonMobil sold its 30% stake in the Saudi Aramco Lubricating Oil Refining Company (Luberef) to Jadwa Investment, a Saudi firm, earlier this month, the companies said in a statement last week.

They did not detail the investment, but one industry source said the deal was worth around $500 million.

Aramco wants Luberef to expand, and this did not fit Exxon's plans in the lubricant market, industry sources said. Exxon is the dominant player in the market, supplying 19% of feedstock globally for lubricant production.

"APSL, which already operates in the lubricant business, wants to use Petrolube to grow aggressively into the kingdom and abroad ... They (APSL) plan to explore their opportunities in the downstream industry," a source familiar with the Dabbagh Group said.

Petrolube, founded 30 years ago, produces finished lubes and greases in Saudi Arabia. It has three lubricants plants in the kingdom with a combined capacity of 450,000 tonnes, according to its Web site.

It says it has 28% share of the lubricants market in the kingdom and exports to 30 countries in Africa and Asia.

Luberef was established in 1976 and produces around 550,000 tonnes per year of oil lubricants at two refineries on the kingdom's Red Sea coast at Jeddah and Yanbu.

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