Saudi Arabia Transformer Oils Market - Forecast(2023 - 2028)

Saudi Arabia transformer oils market size is forecast to reach US$37.4 million by 2027 after growing at a CAGR of 2.3% during 2022-2027. Transformer oil is a mineral-based insulating or cooling oil produced from crude petroleum. It's a combination of different hydrocarbons that includes some aliphatic compounds (open chain compounds) and has the general formula - CnH2n+2 and CnH2n. The Saudi Arabian power supply is undergoing a major transition, moving away from fossil fuels and shifting towards renewable energy sources. Due to this new investments are being made up in new renewable energy sources, which is firmly supporting the transformer oil market in the country. Also, with increasing urbanization and industrial growth, energy consumption is accelerating in Saudi Arabia. To achieve this, new transformers are being set up for adequate power transmission. However, fluctuation in the cost of exporting, trading, importing raw materials, might challenge the Saudi Arabia transformer oil market to a great extent during the forecast period.

Due to the COVID-19 pandemic, in the year 2020, the industry and organizations were being lockdown as a result of which the Saudi Arabia transformer oils market was highly affected. Furthermore, the transmission and distribution industry was particularly hard hit, due to the pause of several ongoing and upcoming development projects in 2020, which diminished the demand for Saudi Arabia's transformer oils. Also, the new facility development projects of power generation, railways and material, and industrial were hindered which further contributed towards Saudi Arabia transformer oils market revenue shrinkage in 2020. Furthermore, as Saudi Arabia adopted lockdown policies to deal with the pandemic, transformer oils manufacturers in Saudi Arabia were temporarily shut down their production facilities and services, impeding the production of transformer oils. Manufacturers were stranded on raw material orders as a result of the COVID-19 area's lockdown, which had a significant impact on the market growth in Saudi Arabia. However, considering the new normal condition and rising growth of the new construction related to transmission and distribution activities the market for Saudi Arabia transformer oils is anticipated to rise in the upcoming years.

The report: “Saudi Arabia Transformer Oils Market – Forecast (2022-2027)”, by IndustryARC, covers an in-depth analysis of the following segments of the Saudi Arabia Transformer Oils Industry.

By Product Type: Mineral oil (Naphthenic (Inhibited and Uninhibited), Paraffinic (Inhibited and Uninhibited), Aromatic Oil), Silicone based oils, Bio-based (Synthetic Ester Transformer Oil and Natural Ester Transformer Oil), Others (Tetra fatty Acids, Fluorocarbon, and Nanofluids).

By Function: Cooling Agent, Lubricant, and Chemical Stabilizer.

By Application: Transformers (Power Transformer, Distribution Transformer, and Instrument Transformer), Switchgears, Circuit breakers, Cables, Reactors, Switches, Capacitors, Generators, and Others.

By End-Use Industry: Transmission and Distribution, Railways & Metros, Power Generation, Industrial, Residential & Commercial, and Others.

The mineral oil segment held the largest share in the Saudi Arabia transformer oils market in 2021 up to 87.9% by revenue and is estimated to grow at a CAGR of 2.1% during 2022-2027. Mineral oil is a liquid by-product of crude oil refinement that is mostly composed of alkanes and cycloalkanes. It has a high pouring point at low temperatures, an excellent thermal cooling capacity, and other properties that make it suitable for use in transformer oils. Also, mineral oils are used in transformer oil because they improve the dielectric strength of the winding and prevent the core from oxidizing. Mineral oil when compared with silicone-based oil is more effective for the dissipation of heat, owing to this mineral oils is used as their replacement, which is boosting the market growth. Thus, because of the above-stated factors, the demand for mineral oil is increasing which is boosting the Saudi Arabia transformer oils market growth.

The cooling agent segment held the largest share in the Saudi Arabia transformer oils market in 2021 up to 65.5% by revenue and is estimated to grow at a CAGR of 2.5% during 2022-2027. The mineral and bio-based transformer oil are often utilized as a cooling agent in applications such as transformers, switches, and more because they have a high insulation capacity. Transformer oil has the advantage of fast heat dissipation, uniform conduction, and recoverable insulation performance, owing to which it is largely utilized as a cooling agent. Transformers are made of copper, which carries a lot of heat. So, it becomes extremely hot during electricity transmission and this may result in power breakdown. Hence, transformer oils are employed to dissipate heat generation and overcome power breakdown challenges by acting as a cooling agent.

The transformer segment held the largest share in the Saudi Arabia transformer oils market in 2021 up to 66.3% by revenue and is forecasted to grow at a CAGR of 2.5% during 2022-2027. Transformers generate high heat due to excessive voltage, which may result in frequent breakdowns. Also to overcome this problem transformers require cooling agents, owing to this transformer oils such as mineral oil, and bio-based oils are utilized in transformers because these oils have cooling and insulating properties. Gases created by oil degradation, moisture and gas from cellulose insulation breakdown, and gases and moisture produced by exposure to the environment are all dissolved by transformer oil. The most valuable information about transformer health comes from careful observation of dissolved gases in the transformer oil, as well as other oil qualities, this helps in the maintenance of the transformers. The new and expanding transformer construction in Saudi Arabia to increase the power supply capacity is anticipated to fuel the Saudi Arabia transformer oils market, as transformer oil functions as a cooling agent in transformers. 

The transmission and distribution segment held the largest share in the Saudi Arabia transformer oils market in 2021 up to 45.7% by revenue and is estimated to grow at a CAGR of 2.7% during 2022-2027. Transformer oils are often used in transmission lines in the transmission and distribution industries. Because transmission and distribution lines emit high amounts of power, they can cause frequent power distribution problems; therefore, transformer oil is used as a cooling and lubricating agent to address these issues. Moreover, the properties of transformer oils such as superior dielectric strength, high insulation, and more make it ideal for increasing the life of the transmission and distribution components such as transformers, generators, and more. Further investments in transmission and distribution projects in Saudi Arabia as shown in the table are expected to increase the demand for transformer oils in Saudi Arabia, thus leading to the growth of the market. For instance, the construction of Saad Solar PV 380kV Substation in Saudi Arabia was announced in 2021 and this project is will be completed by end of 2022. Also, the construction of the Power Saudi Housing Megaproject, Saudi Arabia began in 2021 and is expected to be completed by 2023. Thus, with the rising new facility development related to transmission and distribution, the demand for transformer oils in Saudi Arabia is also significantly rising over the projected period.

Transformers can increase or decrease the current or voltage that is being transmitted through the transmission lines. A distribution transformer is often used in the electric power distribution system to provide the final voltage transformation, by stepping down the voltage used in the distribution lines to the level used by the customer. Thus, there is an increasing demand for transformers in the distribution and transmission network sector. Transformer oils are widely used in transformers because they work well at high temperatures for cooling, insulating, and stopping corona discharges. Transformer oils keep the wiring and cellulose-based insulation in transformers from oxidizing, corroding, and losing their effectiveness. Transformer oils circulate between the core and radiators, reducing the temperature of the infrastructure, owing to their excellent dielectric strength, chemical stability, and thermal conductivity. Upgrades and expansion of Saudi Arabia's underdeveloped electricity sector – both to reduce a large amount of power lost during transmission and to improve access to electricity in rural areas are providing strong opportunities for distribution and transmission network sector growth in the country. For instance, in December 2021, The construction of two 380kV Double Circuit Overhead Transmission Line (OHTL) projects in Saudi Arabia's central region has been granted to Hyundai Engineering & Construction. Saudi Electricity Company granted the projects. Construction of one (1) 380kV double circuit overhead transmission line between Hail-4 BSP and Qassim-2 BSP is part of the project's scope of work. Construction of one (1) 380kV double circuit overhead transmission line between Hail-4 BSP (9070) and Hail-3 BSP is another project's scope of work (9039). Since transformers are majorly used in distribution and transmission networks, there is an increasing demand for transformer oil as well, which is driving the transformer oil market in Saudi Arabia.

The Saudi Arabian data centers have witnessed unprecedented growth in technologies and services over the years. There has been an increase in IT spending of the organizations to simplify the operations and data traffic capabilities in Saudi Arabia. This rapidly growing data traffic is driving data storage demand in Saudi Arabia, which has resulted in the continuous expansion of the data centers in the country. For instance, in November 2021, Saudi Telecom (STC) is constructing a new data center complex in Saudi Arabia. In a SAR1.5 billion (US$400 million) expansion project, the telco will add 125MW of capacity across more than 180,000 square meters (1.9 million sq ft) of land. In July 2021, Saudi Arabia's Ministry of Communications and Information Technology (MCIT) has proclaimed a US$18 billion proposal to construct a wide network of large-scale data centers. According to the ministry, Saudi Arabia intends to become the region's primary data center hub and is functioning closely with the private sector, including local and international investors, to accomplish this objective. In Saudi Arabia, data center structures are associated with increased power consumption and are growing in proportion and size daily. Furthermore, as the workload on data centers has increased, so has the demand for higher-quality power, which is driving the demand for transformers in data centers. The presence of a large number of transformers in data centers is justified by this factor. Transformer oils are often used in transformers for proper functioning and increasing the service life expectancy of transformers. Transformer oil acts as an insulator between the windings, reducing copper losses due to heating and reducing humming noise in the transformer, resulting in reduced vibration. This aids in the proper functioning of transformers and extends their service life. Thus, it is anticipated that with the increasing data center, there will be an upsurge in data center transformers for better quality power supply. Hence, to maintain the transformer used in the data center, there will be a subsequent hike in demand for transformer oils.

The cost of commodity chemicals and the amount of raw materials used during the production process is always influenced by fluctuating crude oil prices. Crude oil is considered the main raw material for the synthesis of transformer oil since it is used to manufacture distinct raw materials. The raw materials often used for the production of the transformer are the downstream products of crude oil such as Naphthenic and Paraffinic (mineral oil). So, the price fluctuation of crude oils also hinders the price of transformer oil. According to the BP Statistical Review of World Energy 2021, there has been a fluctuation in the price of crude oil, for instance, Brent crude oil prices fell from US$98.95 per barrel in 2014 to US$52.39 per barrel in 2015, then rose from US$43.73 per barrel in 2016 to US$71.31 per barrel in 2018, before falling to US$64.21 per barrel in 2019 and US$41.84 per barrel in 2020. And because of this uncertainty or fluctuation in crude oil prices, the price of transformer oil raw materials also fluctuates. Thus, the volatility in crude oil prices is expected to be a significant challenge for the Saudi Arabia transformer oil market manufacturers, which will hinder the transformer oil market growth in Saudi Arabia during the forecast period.

Technology launches, acquisitions, and R&D activities are key strategies adopted by players in the Saudi Arabia transformer oils market. Major players in the Saudi Arabia transformer oils market are:

Royal Dutch Shell PLC (Shell Saudi Arabia)

Report Code: CMR 0196

Report Code: AIR 0205