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Luberef awards contract for Yanbu plant expansion

28 February 2023

Saudi Aramco Base Oil Company (Luberef) has awarded the engineering, procurement and construction (EPC) contract for the second expansion phase of its production plant in Yanbu on Saudi Arabia’s Red Sea coast.

It awarded the $148m deal to Egyptian contractor Petrojet. The duration of the contract is 30 months.

The project aims to boost the Group 2 and Group 3 base oil production potential of its Yanbu plant to nearly 1.3 million metric tonnes a year (mt/y). The facility currently has an output capacity of 1.1 million t/y.

Luberef production portfolio

Luberef has a base oil production capacity of 1.3 million mt/y of Group 1 and Group 2 base oils. In 2021, it was the second-largest producer by capacity in the Middle East.

Luberef was incorporated in 1976 as a pure play base oil producer and operates two production facilities in Yanbu and Jeddah on the kingdom’s west coast.

The Jeddah facility was commissioned in 1977 and has a production capacity of approximately 275,000 mt/y of Group 1 base oils.

The Yanbu facility was commissioned in 1997, with an initial production capacity of approximately 300,000 mt/y. Following the completion of an expansion project in 2017, the Yanbu facility’s output increased to 1.1 million mt/y, and Luberef was able to start producing Group 2 base oils in Saudi Arabia.

Luberef also produces various byproducts such as asphalt, marine heavy fuel oil, slack wax, bright stock extract and sulphur, and white products such as ultra-low sulphur diesel, naphtha and drilling fluid.

As well as being consumed locally, Luberef’s products are mainly sold in end markets across the Middle East, North Africa, India, Asia, the Americas and Europe.

The company markets its key products under trademarks licensed by Aramco. Group 1 base oils products are branded as “aramcoDURA”, Group 2 base oils products as “aramcoPRIMA”, and Group 3 base oils products as “aramcoULTRA”.

The company is a member of the Aramco Base Oil Alliance formed in 2019 between Aramco and its other two base-oil-producing subsidiaries – S-Oil and Motiva.

Luberef financial performance

Luberef posted a 32 per cent rise in full-year net profit in 2022, driven by increased sales volumes and improved base oil crack margins.

Net profit after zakat and tax rose to $527m, up from $400m in 2021. Revenue jumped 20 per cent year-on-year to $2.82bn due to higher crack margins in base oils and byproducts.

“The company recorded its highest net income in its history in 2022,” Luberef said on 19 February in a filing with the Saudi Exchange (Tadawul), where its shares trade.

Base oil crack margins increased 10 per cent annually to $666.66m in 2022.

Saudi Aramco owns the majority 70 per cent stake in Luberef.

The annual results are the first for Luberef since it began trading shares on the Tadawul in December. The company raised $1.32bn from its initial public offering, in which Aramco sold over 50 million shares or about 29.7 per cent of the firm's issued share capital.

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Indrajit Sen

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