OGN: What were the driving forces behind the Strategic Investment Programme at Bapco? How confident are you that the projects will meet Bapco's objectives?

We conducted a benchmarking and strategic review for the strategic investment programme (SIP) in 1998, at which time we were assessing where we were in relation to our future objectives.

There were four key driving forces behind the SIP:

1) To keep the refinery operating to high quality product standards - this was a market-driven factor as we needed to upgrade the quality of our products such as diesel and gasoline

2) To improve the refinery's efficiency - this factor was margin/profit driven as we looked at the efficiency of key processes in the refinery. Some equipment was becoming obsolete and therefore less efficient

3) To maintain the company's competitiveness - to do this, we looked at reducing operating costs, which were high due to the obsolete equipment. This factor was driven by economics and also involved improving best practices.

4) To anticipate and meet increasingly strict environmental standards for refined products

We analysed a vast amount of information to develop a recommendation - including a financial model - on the SIP, which was presented to the Supreme Oil Council in 1998. The programme was then approved by the Council in the same year.

Despite the needs to be addressed by the SIP, Bapco's standards have always been high. Our operations have been very sound, our safety record is second to none, the reliability of equipment has been very good and our high plant utilisation is constrained only by crude availability.

We are also able to benefit from competitively-priced gas to reduce our overall operating costs at the refinery, though our maintenance costs are still on the high side.

The strategic business plan also aims to enhance Bapco's role as a good corporate citizen. For example, the community Awali Hospital is also now operating more efficiently and offering better service.

When all the upgrade projects are complete, Bapco will be a highly complex, modern refinery.

OGN: Please provide an update on the status of the low sulphur diesel project at the refinery?

The scope of the project involves a new 40,000 barrels per day Hydrocracker and Hydrogen Plant, Sulphur Plant, Offsites and Utilities, including control rooms and power facilities.

There will also be modifications to the existing Mild Hydrocracker.

Lumpsum proposals from major contractors in response to our specific requests are being evaluated.

We will analyse the technical proposal, execution plan and commercial proposals separately. These will take six to eight weeks to analyse and following this, we will make recommendations. Awards are expected by the middle of this year.

In terms of construction, site levelling will start in the fourth quarter of this year. By the second quarter of next year we will start with foundations and buildings. Mechanical construction will start by the middle of next year, and completion is expected by the first quarter of 2005.

We are already training operators in-house for this project (as well as other projects in the upgrade programme).

OGN: Please give an update on the merger between Banoco and Bapco. What are the main challenges you have faced in the merger process?

From an overall structural point of view, we have developed several Core Business Units which are charged with managing the various business sections across the whole value chain.

We have also implemented a performance measurement system for the merged company. As such, a set of business success criteria have been defined which can be measured in quantitative terms by Key Performance Indicators reported in a balanced scorecard format.

As far as the IT systems are concerned, a project is currently under way to rationalise and redefine the different IT components of the business. All the financial, manpower and technical aspects of the project have already been implemented as we upgrade to Oracle II i.

Oracle offers a flexible system for the unitary approach we take to information processing at Bapco, as it can be interfaced with other systems and its ultimate aim will be to boost efficiency at the merged company.

Systems integration for the merger should be completed by the end of November this year, and we will make the switch on January 1, 2003.

We are also undertaking a strategic analysis for the new merged company, and we have quantified longer-term goals for the new entity. These strategies and goals are currently being communicated to the heads of the various Business Units by the Strategic Planning Council.

A Business Process Analysis has also been completed throughout the organisation by the different Business Units, to find out how the different functional groups of the company should work together.

We have also recently updated a migration plan for all aspects of the merger, which covers the company's relationships with outside contractors and suppliers.

The merger process has gone well with little resistance from within the various units involved and thanks to the clear direction and leadership from the management. The teamwork has, in particular, been excellent and most of the systems implementation will be completed by the end of this year.

OGN: Supply chain planning (SCP) is a key aspect of the merger. How successful has the implementation of the Phase 3 pilot of the SCP programme been?

We set up a team in November last year to look at refining/marketing processes and to benchmark these against other refineries with a view to improving the interaction between the refinery and the marketing functions.

Working as part of the merger team, the SCP team identified the best practices and then looked at how to best achieve these in the Bapco context. Recommendations centred around planning processes, simulation models and prediction models. The process has been going well.

OGN: What factors have contributed to Bapco's recent safety record achievements?

There are three main factors. Firstly, we have almost 3,000 staff, so employee diligence plays a key role.

Secondly, our awareness programmes, which focus on the safe behaviour of employees, for example in assessing risks, have been well received by the employees.

Thirdly, we implemented a Process Safety Management (PSM) set of standards developed by the American Petroleum Institute (API) in 1990, and have been rigorously enforcing these standards ever since.

Total lost time and non-lost time accidents were in single figures last year, the first time this has happened in the history of the company.

OGN: Please give an update on Bapco's move towards ISO9001:2000. How will this new standard affect Bapco?

As part of the certification, Bapco has already evaluated Quality Management Systems and product realisation, as well as measurement analysis and improvement. We will be evaluating management responsibility by September and resource management by next March.

The new accreditation covers the crude refining process, management and maintenance, but does not cover the upstream oil and gas business of the newly-merged company. The new ISO9001:2000 is simpler and more flexible for organisations to adopt and use.

However, even though the upstream business is not accredited, we actually use the same system.

OGN: Please outline the steps Bapco is taking to reduce its annual maintenance budget.

We have analysed the potential benefits of reduced maintenance costs and have set clear targets to reduce these costs and improve the maintenance index by the end of next year.

We have commissioned a consultant to set up new systems, which came about as a result of the whole benchmarking process which has taken place at Bapco.

We have been conducting 'Risk-based Work Selection' which focuses on risk analysis and the necessity of conducting certain maintenance jobs. We do this with well-proven methodology so we take calculated, not actual, risks.

We are also studying ways of saving money by using fewer materials, using fewer contractors and by having shorter shutdowns of units.

OGN: IT utilisation is boosting operational efficiencies at refineries worldwide. How does Bapco balance the inevitable deployment of IT systems with ongoing efforts to employ more Bahrainis?

There is no trade-off between IT systems and the staff at Bapco.

For our process systems, highly sophisticated simulation models do offer better decision-making and control. But these systems still need support, maintenance and operation.

Many Bahrainis have learned new skills as a result of the IT upgrades, making them more marketable professionally.

OGN: Bapco is turning to Africa for exports. What factors have caused this move away from your more traditional export markets such as India?

There are two main factors for this shift. Firstly a change in the supply scenario in India, where major refiner Reliance recently brought a major new complex onstream.

Secondly, there has been a change in diesel sulphur specifications in many markets.

In today's globalised market, Bapco has to be flexible. We are already flexible on product mixes, we are able to serve niche markets and we are a reliable supplier.

As the SIP is completed, we will be exploring new markets even as far as Europe, which could offer real potential for us.

Bapco is focusing on other projects to improve product quality and profitability. We are planning to increase the recovery of LPG from process gas (in conjunction with Banagas) which will be a high profit project, while we are also planning to study ways of improving the economics and reducing the amount of fuel oil we produce. This will only be possible once the low sulphur diesel project is complete.