major transformations are occurring in the global lubricants industry

major transformations are occurring in the global lubricants industry

In early March 2023, The Saudi Arabian Oil Company (Aramco) announced the completion of the acquisition of the global products business of Valvoline Inc., for $2.65 billion.

Background

Dhahran, Saudi Arabia-based Aramco completed the acquisition of Valvoline’s Global Products unit in March 2023. The deal, which closed for $2.65 billion with an equity purchase agreement between the two companies, was first announced on 1st August 2022. With this acquisition, Aramco now owns the ‘Valvoline’ brand and the products including lubricants, heat transfer fluids, and other maintenance products sold through Valvoline’s global products business. Valvoline Global Operations will continue to be based at Lexington Kentucky, USA.

What major transformations are occurring in the global lubricants industry

Over the past decade, the global lubricants industry, especially in the automotive sector, is being significantly impacted by the megatrends including rapid electrification of vehicles and the demand for reducing vehicle emissions. The rise of electric vehicle (EV) demand also has been impacting the overall lubricants demand as EVs do not require engine oils that contribute to the highest share of the total automotive lubricants demand. Adding to that, the rising awareness regarding the need for emission reduction and increasingly stringent regulations that mandate vehicle emission reduction and improved fuel economy is driving lubricant manufacturers to develop and commercialize advanced, low viscosity, premium lubricants that are based on purer grades of base oils.

What the Acquisition Means to Aramco and the Global Lubricants Industry

Aramco, one of the largest base oil suppliers in the world, entered the formulated lubricants space in late 2021 with the launch of Orizon, a brand of automotive and industrial lubricants, on a modest scale. With that, the company highlighted its focus on the supply of refined and more value-added products. Its well-established base oil business, Lubref, enables the company to be strongly backward integrated with the supply of Group I, Group II, and Group III base oils.

The acquisition of Valvoline is a strategic move to organically expand Aramco’s market position in the global lubricants space and become one of the leading branded lubricants suppliers. Valvoline has a significant share in the automotive lubricants space with long-term relationships established with leading OEMs and aftermarket service centres.

The capabilities of the two companies that very well complement each other will help both businesses gain further competitive advantages in terms of accelerating growth, focusing on advanced product development, and devising improved service strategies in a fast-changing lubricants sector. At a time when the global automotive lubricants industry is grappling with the rapidly changing product landscape due to the exponential growth of EVs and other new energy vehicles, the established product portfolio and in-house R&D capabilities of Valvoline, combined with the base oil expertise of Aramco, makes the company ideally placed to further develop advanced E-fluids and other premium products for the industry, thereby paving way for future growth.

About Christeena Thomas

Chirsteena is a Program Manager of the Chemicals Materials & Nutrition (CMN) practice with more than 13 years of industry experience and Subject Matter Expert for Lubricants & Heat Transfer Fluids. Has specific expertise in Assessing the impact of megatrends such as sustainability and digital transformation on stakeholders in the industry. Has knowledge of a wide range of markets for performance materials, from lubricants, coatings, adhesives, sealants, and plastics.

Christeena Thomas

Chirsteena is a Program Manager of the Chemicals Materials & Nutrition (CMN) practice with more than 13 years of industry experience and Subject Matter Expert for Lubricants & Heat Transfer Fluids. Has specific expertise in Assessing the impact of megatrends such as sustainability and digital transformation on stakeholders in the industry. Has knowledge of a wide range of markets for performance materials, from lubricants, coatings, adhesives, sealants, and plastics.

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