Riyadh sets sights on auto industry

02 April 2012

The $1bn expansion at Luberef will allow the firm to start producing high quality type-three engine oil

Saudi Arabia’s downstream oil and gas sector is so busy in 2012 that even $1bn projects can sometimes pass by relatively unnoticed.

The $1bn expansion at the Saudi Aramco Lubricating Oil Refining Company (Luberef) refinery in Yanbu is a great example of some of the smaller projects being tendered in the kingdom at the moment. The scheme involves Luberef adding a lube hydrocracker to its existing facilities. This will allow the company to start producing high quality type-three oil, used in the engines of luxury cars.

Some experts working in the kingdom’s downstream industries have expressed doubts about Saudi Arabia becoming a hub of automotive production and says that the target of constructing 500,000 vehicles a year is too ambitious.

Luberef adding type-three oil to its product line underlines the commitment Riyadh is making to potential investors. It shows the government is willing to put the value chain in place that will allow investors to build an automotive industry to compete in the global market.

The fact is that the kingdom’s downstream project market is almost unparalleled in the world and no similar-sized country is investing anywhere near as much money into building up its heavy and light industries.

If this growth continues, there must come a point in the future where the numbers will add up for a potential automotive investor.

If one major company decides to build a plant and take first-mover advantage then even the doubters might start to believe it can be done.  

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