Bahrain Energy Market Overview-How to write Dissertation
In spite of modest oil and gas reserves, Bahrain is heavily dependent on the hydrocarbons sector. In 2007 petroleum exports accounted for 75% of the country's total exports, having risen steadily from 66% in 2001. Oil refining is a major downstream industry, along with aluminium smelting – also an energy-based business. All of Bahrain's 125mn bbl of proven oil reserves are located in the onshore Awali field, which was the first Arabian Gulf oilfield to enter production following its discovery in 1932. Peak domestic crude production of 75,000b/d tumbled to around 35,000b/d in 2008. Domestic oil consumption in 2008 was an estimated 41,000b/d.
Bahrain’s overall liquids output is topped up to approximately 48,000b/d thanks to natural gas liquids (NGLs) and refinery gains. It also takes around 150,000b/d from its half share of Saudi Arabia’s offshore Abu Saafa field. Bahrain also purchases Arab Light crude oil from Saudi Arabia via a subsea pipeline, which it refines for export at its Sitra refinery. State-owned Bahrain Petroleum Company (Bapco) refines this crude oil and exports much of it via tanker. Most of Bahrain’s exports go to India and other Asian markets. Joint Bahrain-Saudi Arabian crude oil production from the offshore Abu Saafa field is sold from the Ras Tanura terminal in Saudi Arabia.
There are potential offshore oil reserves in the Gulf of Bahrain, although exploration efforts to date have been disappointing. These areas became available for exploration following a March 2001 International Court of Justice resolution of a territorial dispute between Bahrain and Qatar over islands located between the two countries. Bahrain has since offered concessions to IOCs, with PTTEP of Thailand, Canada's EnCana, US major Chevron and Malaysia's state-owned Petronas all taking shares.
While there are small volumes of Bahrain's oil production available for export, the country relies on refined products trade for its oil revenues. There is just one refinery at Sitra, south of Manama, with current processing capacity of 262,000b/d (Oil & Gas Journal (OGJ), December 2008). A major upgrading programme has recently been completed, aimed at improving the fuel specifications in order to meet the latest environmental requirements. In December 2007, the Low Sulphur Diesel Production (LSDP) facility at Bapco’s refinery was inaugurated. This project reduces the current high-sulphur content in Bapco’s diesel pool, ensuring sales in the international diesel market. It can produce 60,000b/d. The government has studied the possibility of building a petrochemical complex alongside the Sitra refinery, but no final decision has been reached on whether or not to proceed.
Bahrain has natural gas reserves of about 92bcm, most of which represents associated gas from the Awali oilfield. The country produces some 11.5bcm per annum, so its domestic reserves will last for less than a decade without new discoveries. The largest domestic gas consumer is Aluminium Bahrain (Alba), which uses it in its power plant. However, Bahrain's growing demand for gas-fired electric power generation will require substantial imports. A deal to import Qatar gas has never been ratified, while talks appear to have been concluded with Iran about possible imports of 10.3bcm per annum from 2015. Bahrain has approaching 2.5 gigawatts (GW) of installed electric generating capacity, producing up to 10 terawatt hours (TWh) of power annually. Officials from Bahrain’s Ministry of Electricity and Water (MEW) expect that electricity demand will grow by 7% annually through to 2020. To help meet rising demand, Bahrain has encouraged independent power projects (IPPs) and has allowed the privatisation of some state-owned power sector assets.
In February, 2008, PTTEP and US-based Occidental were awarded E&P licenses offshore Bahrain. PTTEP signed the exploration and production sharing agreement (EPSA) for Block 2, where it committed
to drilling at least two wells in the Khuff formation. Occidental signed an EPSA for Blocks 3 and 4, where it committed to drilling three wells in the Arab formation. Both companies also committed to perform seismic surveying of their areas during their six-year exploration periods. In case of a commercial discovery, the exploration period will be converted to a 24-year production period. In August 2007 a holding company was established to administer the government’s 100% stake in Bapco, its 75% of Banagas, its 60% stake in aviation fuel company Bafco, and its one-third share of Gulf Petrochemical Industries Company. The holding company will invest in the domestic oil and gas industry, establish new companies and also invest in energy companies abroad. It is under state supervision.
In November, 2007, Bapco received eight bids from IOCs for a project to upgrade operations in the Awali
field. Bahrain then compiled a short list of three potential partners for the onshore oil field project, comprising ExxonMobil, Occidental and Denmark’s Maersk Oil. Bahrain’s oil minister said the country would add another 700 oil wells over the next 15 years to maintain and increase oil production. Bahrain hopes by the end of April 2009 to finalise a deal with Occidental to overhaul Awali an energy official told Reuters in early January 2009. Abdul-Hussein Mirza told the news agency that, if all goes well, Bahrain will sign the agreement before the end of 2009. The contract would give Occidental a share of production if it manages to boost output from the field above a target figure. Bahrain targets doubling oil output and also raising gas production at Awali.
October 27 2008 saw the official launch of Bahrain's deep onshore natural gas exploration licensing round. According to the oil minister and chairman of the country's National Oil and Gas Authority (NOGA), Abdul Hussain bin Ali Mirza, representatives of 25 international oil companies were present at the launch of the licensing round, with many more also having expressed their interest in the newly offered acreage. The interested companies will gain access to the data room in January/February 2009, with the bidding deadline scheduled for the end of Q209. Bahrain has said that oil companies' initial interest in the tender is very encouraging and indicates the acreage's significant potential. The acreage on offer includes onshore natural gas deposits that lie up to 6,096m below sea-level. The country will therefore need to attract investors with the right technological skills, equipment and experience to explore these deep deposits. The expressed interest in this acreage by some of the majors indicates their confidence that the area holds potential reserves.
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