The physical merger of Bahrain Petroleum Company (Bapco) and Bahrain National Oil Company (Banoco) is now underway.

The historic merger, which was approved approximately one year ago by the Supreme Oil Council, will be completed in 15 months, according to reports.

However, some aspects of the transformation will move quickly and will be in place by this summer.

Oil and Industry Under-Secretary and Bapco president and managing director Mohammed Saleh Shaikh Ali said the move would ''turn the company around completely''.

The new Bapco will be ''a modern, vertically-integrated firm with its hands on every segment of the oil industry,'' he said.

The two companies have always been interdependent, so the merger is expected to improve efficiency.

The transition focuses on supply chain planning, equipment manufacturing and maintenance, information technology and human resources.

KPMG Fakhro had been working with the merger's core committee and the team has just finalised the new corporate blueprint, said Shaikh Ali.

He said the manufacturing and marketing integration process should run smoothly, and that there should be no production or disruption delays resulting from the integration.

Shaikh Ali said UK-based KBC had conducted its inventory and assessment of equipment maintenance, availability and manufacturing reliability.

Shaikh Ali admitted the integration would be stressful and sometimes arduous, but that every effort would be taken to ensure continuity and uninterrupted work flows.

He could not say whether the merger would result in job cuts for any of the 3,000 workers from both companies.

However, he was optimistic that solutions would be found to accommodate employee concerns and management objectives.

''We are not going about this using traditional methods,'' he added.

''We are reviewing and analysing work processes rather than looking at staff reductions.''

Bapco has adopted the ''Best Practices'' hierarchical approach to the merger.

This technique focuses on developing a systems re-design network rather than direct departmental integration.

Shaikh Ali reiterated his confidence in the procedure, adding that nothing was being left to chance.

''The merger blueprint has been drawn up to include every possible detail,'' he continued.

''We have specific assignments, targets and a timetable that we will meet.''

Officials also say that, by creating an enterprise with a greater asset value, the government's ability to attract outside finance to fund the capital investment in the refinery is also enhanced.

On Bapco's modernisation programme, Shaikh Ali said each phase of the four-year plan remained on schedule and the company would likely announce the financing scheme by this summer.

Bapco's two major accomplishments last year, the in-line blending project and the production and launch of unleaded fuel, have had a positive economic impact.

Shaikh Ali revealed the company was seeing financial improvements, especially in the past few months.

''Profit margins had been suffering in the past few years because of the price of oil,'' he said.

''And while profitability still hinges on global market conditions, I believe we will remain on the turnaround.''

Ninety five per cent of Bapco's products are exported, with more than half shipped to India and the Far East, and GCC states and East Africa accounting for most of the rest.

But while recent high oil prices have improved the profitability of Bapco's products - including liquefied petroleum gas (LPG), naphtha, gasoline, kerosene, aviation fuel, diesel oil, heavy lube distillate, fuel oil and asphalt - it has also increased costs.

In particular, last year there was a significant squeeze on is margins, according to a company official, as crude oil prices rose relative to those for refined products.