Bahrain revitalises its energy sector

Last week, Bahrain's oil and gas minister, Abdulhussain bin Ali Mirza, announced that four offshore exploration blocks have been put out to bids.

Mirza, who is also the chairman of Bahrain's National Oil and Gas Authority (NOGA) told delegates at the 15th Middle East Oil & Gas Show and Conference (MEOS) that the offer was part of a NOGA programme, in association with Bahrain Petroleum Company (BAPCO), to attract international oil companies to invest in production and exploration of Bahrain's offshore blocks. The bidding for these blocks, which total 6652 sq km, is scheduled to close on September 17, following a road show in late March and April that would take officials to London, California and Texas. The contract awards are expected to be announced at the end of October.

Both NOGA and BAPCO hope new advances in exploration technology and data assessment will help in the discovery of more oil reserves in Bahrain's territorial waters and extend the life of existing reserves.

In November 2001, Bahrain awarded two blocks off the country's southeastern coast to the Malaysian company Petronas and another to ChevronTexaco. Both companies have since begun to explore their concessions although, to date, no new discoveries of oil in commercial quantities have been reported.

Mirza said the government is also pushing ahead with a separate onshore development and production bid to reactivate opportunities in discovered hydrocarbon assets.

BAPCO also announced at MEOS that it had awarded a $33 million contract to Kuwait's Burgan Drilling Company. The agreement entailed the provision of two contract rigs and the drilling of 70 wells of varying designs, including vertical and horizontal wells, in Bahrain.

Bahrain's energy sector was also boosted by the news that Saudi Aramco resumed full operations of the AB-1 pipeline transporting crude oil from Saudi Arabia to Bahrain after it had been closed for about a month due to unscheduled maintenance work. The pipeline is vital to Bahrain's energy sector as it transports approximately 230,000 barrels of crude per day (bpd) from Saudi Arabia to Bahrain's only refinery.

These recent developments serve to brighten the energy sector's prospects in Bahrain. Following a gradual decline in crude output from 70,000 bpd in the 1970s to a current 37,000 bpd, Bahrain has established a highly successful refining process, processing its own production as well as the much higher quantity of crude that the kingdom receives from Saudi Arabia. Furthermore, Bahrain is planning to invest $1 billion on modernising its refinery, which is the oldest one amongst the Gulf Co-operation Council (GCC) member states.

A key element of the refinery's modernisation is the $695 million Low Sulphur Diesel Production Project (LSDP), which aims to reduce the current high-sulphur content of BAPCO's diesel pool from an average of 0.65% to .001%. This will enable BAPCO to ensure increased sales in international diesel markets where vehicle exhaust emissions are strictly regulated.
Bahrain's energy sector still has to contend with a number of concerns.

At MEOS, Mirza warned that political instability could affect the region's ability to meet increasing global oil demand. Mirza's comments came as diplomatic tension between Washington and Tehran increased over Iran's nuclear programme.

In addition, there is the feeling amongst industry observers that human resources in the sector need to be developed. Samuel Knight, senior specialist of corporate communications at BAPCO, recently told Oxford Business Group there must be a greater focus on training and development if the sector is to be prepared for the future. Knight said that the employment package in Bahrain's energy sector is not as lucrative as it is in other parts of the Gulf, which could lead to recruitment problems. However, Knight was keen to stress that addressing the concern surrounding human resources has become one of BAPCO's main priorities.

(C) Oxford Business Group - www.oxfordbusinessgroup.com

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