In a move reflecting the drive to bolster downstream industries in Saudi Arabia, Saudi Aramco Base Oil Company (Luberef) announced today the signing of a strategic memorandum of understanding with Saudi Arabian Oil Company (Saudi Aramco). This memorandum aims to explore and evaluate opportunities for joint collaboration to develop a state-of-the-art base oil production facility within the Jazan Refinery and its associated petrochemical complex.
Agreement details and timeline
Luberef clarified in an official statement published on the Saudi Stock Exchange (Tadawul) website that the memorandum of understanding (MOU) is valid for 18 months and is renewable by mutual agreement. The primary objective of the agreement is to conduct comprehensive feasibility studies to assess the viability of establishing a new plant that would utilize unconverted crude oil (UCO) from Saudi Aramco as its primary feedstock. This MOU establishes the necessary framework for conducting all technical, commercial, and operational studies during the initial development phases, paving the way for informed investment decisions.
The importance of the Jazan refinery and its strategic location
The selection of the Jazan refinery as a potential site for this project stems from the region's strategic and logistical importance. The Jazan refinery is one of the most modern refineries in the world and is part of Jazan City for Basic and Downstream Industries. Located on the Red Sea coast, it enjoys a competitive advantage in exporting to global markets, particularly in Africa and Europe. Integrating a base oil production unit within this massive complex will enhance industrial integration and maximize the utilization of the advanced infrastructure in which Saudi Aramco has invested.
Enhancing Luberef's capabilities and meeting global demand
Luberef indicated that this initiative represents a key pillar of its Group III+ expansion project. This project aims to expand the company's production capacity to meet the growing global demand for high-quality (Group III) base oils, which are used in the manufacture of modern, high-efficiency, low-emission engine oils. This move underscores the company's commitment to solidifying its position as a leading supplier of base oils in the region and globally.
Economic impact and alignment with Vision 2030
This collaboration aligns perfectly with the goals of Saudi Vision 2030, which aims to maximize the added value of hydrocarbon resources and diversify the national economy through the expansion of the downstream refining and petrochemicals sector. If finalized, the project is expected to create new job opportunities in the Jazan region, support local content, and boost Saudi non-oil exports.
The company concluded its statement by noting that the current memorandum of understanding is not legally binding for the establishment of the project, and that any future material developments, including final approvals or the signing of binding agreements and the determination of financial implications, will be announced in accordance with applicable regulatory requirements in the financial market.
