BAHRAIN’s National Oil and Gas Authority (Noga) is pressing ahead with upstream, midstream and downstream initiatives to secure the future of the country’s oil, gas and petrochemcials industry, says Oil and Gas Affairs Minister Dr Abdul-Hussain Bin Ali Mirza.
These plans include a massive new pipeline from Saudi Arbaia to Bahrain to feed its refinery, exploration initiatives and a new lubricant base oils plant, he says.
Dr Mirza is also the chairman of Noga, which was established in September 26, 2005. And as Noga marks five years of operations this week, the authority has every reason to celebrate with initiatives to boost oil and gas production and hydrocarbon reserves well under way. “We are today placed in a very inflationary environment, but we have taken the challenges head on and reacted proactively to retain our competitive edge and stay on course for continued growth and earnings in line with market expectations,” Dr Mirza says.
Commenting on the planned multi-million-dollar pipeline, Dr Mirza says the design and route of the massive pipeline to bring crude oil from Saudi Arabia to Bahrain will be completed later this year.
The $350-million project, which is expected to be completed within a year, will ensure that the Bahrain Petroleum Company (Bapco) refinery in Sitra receives around 350,000 barrels of oil a day, says Dr Mirza, adding that the project is being undertaken to expand and replace the existing capacity and an old pipeline. “The 114-km pipeline will use a safer route that avoids going through inhabited areas and will also use state-of-the-art technology,” he says.
Another area of focus will be on building a new state-of-the-art plant for the production of high-value lubricants base oil stock in a joint venture with Noga Holding and Neste Oil of Finland.
The minister says Bahrain also recognises that attracting, developing, and retaining highly talented employees is critical to future success. “In this context, the current shortage of skilled manpower is a cause for greater concern compared to the rising cost of materials.
“We are in the process of streamlining our oil industry human resources strategies and have prepared a comprehensive succession plan for all our oil and gas and petrochemical companies.”
Regarding Bahrain’s proposed gas imports from Iran, Dr Mirza says Bahrain and Iran have overcome a diplomatic dispute, but talks on the price of gas imports from Iran will still likely be lengthy. Bahrain signed a preliminary agreement in 2008 with Tehran to import up to 1 billion cubic feet per day (bcfd) of natural gas from the Islamic republic, but the two countries have yet to agree final terms. “Negotiations on gas always take a long time because we have to agree on a price,” Dr Mirza says.
Talks were interrupted for several months last year by a diplomatic spat, after an Iranian official reportedly made comments questioning Bahrain’s sovereignty.
Imports would be between 500 mmcfd to 1 bcfd, Dr Mirza says.
Iran’s plans to become a major gas exporter have been frustrated as sanctions block its access to the technology needed to build facilities to liquefy gas and export it on specially designed tankers. Bahrain, like its Gulf Arab neighbours, expects demand for natural gas to rise rapidly as a petrodollar-fuelled boom in the region feeds its economy.
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Dr Mirza opening the Petrotech 2010 |
Meanwhile, Bahrain aims to boost its supply from its gas field to 2.7 bcfd from 1.7 bcfd. It also aims to increase crude output from the field to 100,000 barrels per day (bpd) from 32,000 bpd in seven years, Dr Mirza says.
Last year, US-based Occidental Petroleum Corp and the UAE’s Mubadala Development Co agreed to invest $15 billon to develop the onshore Bahrain Field.
Under the terms of the production agreement, Los Angeles-based Occidental holds a 48 per cent stake, with Mubadala holding 32 per cent and the Bahrain oil and gas authority holding the rest.
Bahrain is also pressing ahead with offshore exploration with four blocks being developed by international players. These include Oxy which is developing blocks 1, 3 and 4, and the Petroleum Authority of Thailand Exploration and Production (PTTEP) which is working on Block 2.
Dr Mirza says the future for heavy oil has come and now is the time for the Middle East to grasp this opportunity.
“The Middle East is estimated to have in place 1,000 billion barrels of heavy oil which is equivalent to 28 per cent of the estimated world total reserves,” says Dr Mirza. “Despite this immense resource base, heavy oil and natural bitumen accounted for only 3 billion of the 25 billion barrels of crude oil produced by the beginning of this millennium.
The vast reserve demonstrates the importance of heavy oil as a future energy source, one that cannot be overlooked and, therefore, companies that position themselves early in the heavy oil business are likely to win the game.”
He says heavy oil was expensive to produce with Canadian production in Alberta estimated to only breakeven at $35. However he believes that in Bahrain heavy oil could be retrieved at between $8 and $9.
“Heavy oil will be a saviour to the ever-increasing demand for fossil fuels from the developing nations,” he says.
“My view is that 2008 was a turning point. Crude oil rose to the lofty price of $147 a barrel and then dropped to a low of $34.
“Since then it has returned to today’s price of around $70. I believe this signalled that the global economy can support a price in the $70 to $80 range even in times of recession.
“It is significant because at this price range the heavy oils and shale oils can become an economic reality.
“We now have a confluence of a crude oil price which will support exploration and production of heavy crude oil, an ever-increasing demand for the product and a global economy accepting that the true vale of crude oil in the future will be much higher than has been enjoyed in the past,” he says.
“To overcome the challenges in successfully bringing out the heavy oil we need partnerships among national oil companies, international oil companies and service companies,” he adds.
“They must find ways to reach meaningful and mutually beneficial alliances. As development efforts focus on extracting resources in increasingly challenging areas and difficult reservoirs, the ability to forge strong partnerships leveraging on respective strengths will be essential to the successful development of such resources,” he says.
