Reuters is reporting that Saudi Arabian family firm Dabbagh Group is in the advanced stages of buying out Gulf Oil International Group's stake in a lubricant venture in the kingdom, a deal prompted by strategy differences between the partners, sources aware of the matter said.

Jeddah-based Petromin is a joint venture between Gulf Oil International Group - a unit of the Indian family-owned Hinduja Group which owns a 49-percent stake, and Dabbagh Group with a majority 51 percent stake.

The strategic differences over the business, which sources say is valued at about $700 million, prompted Hinduja Group to hire Deutsche Bank last year to help review options, including a potential sale.

"It's pretty much a done deal now and they are waiting for some formal processes before signing it. Petromin is a profitable business and it makes sense for the Saudi family to keep it within the group," the source said.

In November 2007, Dabbagh Group and Gulf Oil International Group, for $200 million, acquired Petromin, previously a joint venture between Saudi Aramco, which owned 71 percent of Petromin, and Mobil Investments, an affiliate of ExxonMobil, which owned the remaining 29 percent of the company.

Petromin, the oldest lubricant company in the Middle East and formed by royal decree in 1968, produces finished lubes and greases in Saudi Arabia. The company operates lubricant blending facilities in Riyadh and Jubail, in Saudi Arabia, having three lubricants plants in the kingdom. It claims to have 28% share of the lubricants market in the kingdom and exports to over 35 countries.

In 2010, the Hinduja Group said it was planning a $1 billion initial public offering for Petromin and had hired Saudi British Bank to run the process. The IPO plans did not go ahead.

The Hinduja Group, which has interests across banking, media, power and automobiles in India, has a sizeable presence in the Gulf including Hinduja Bank in Dubai.

Just last month, Gulf Oil International along with its joint venture partner, the Government of Ras Al Khaimah, opened Gulf RAK Oil, a 30,000 metric tpa state-of-the-art lubricant manufacturing plant and grease processing facility in the emirate of Ras Al Khaimah, located approximately 90 kilometers, or 50 miles, northeast of Dubai. Gulf Oil International owns two other lube blending plants located in Jebel Ali, approximately 35 kilometers, or 20 miles, southwest of Dubai.