66 December 2011 BTM Offshore progress The government has offered all four of its offshore blocks to international companies for exploration and production of new offshore fields. During the year, good progress was made by Bapco and its international partners, Thailand-based PTTEP and Occidental Petroleum Corporation. Under the Field Phased Development Project, 17 oil wells were drilled in 2010 and 43 oil wells drilled in 2011. Bapco and Occidental have identified several hydrocarbon prospects in Block 1 and an experimental well is being drilled here. Teams from Bapco and PTTEP have jointly identified a hydrocarbon prospect in the South Jarim area of Block 2. In Block 3, Occidental is drilling its second commitment well after finding non-commercial quantities of gas in its first exploratory well in the Jurrasic Hanifa Formation. While Occidental expects gross gas production from Awali to rise to 1.6 billion cubic feet per day by 2014, Bahrain could actually double its gas output by delving deeper. The government has signed an agreement with Occidental for deep gas exploration. This will involve drilling under the existing oil fields to explore gas reserves at depths ranging from 15,000 to 20,000 feet. Augmenting supply Bahrain seeks to gradually ramp up its present refining capacity of around 262,000 bpd. A master plan drawn up for the expansion of Bapco’s refinery seeks to enhance its competitiveness while maintaining the profitability and sustainability of its downstream business. Once implemented, the refinery project will see processing capacity expanded from the present 260,000 bpd to around 400,000 bpd by 2018. Bahrain is also in talks with oil giant Saudi Aramco for construction of a new pipeline of more than 100 kilometres between Bahrain and Saudi Arabia. Expected to cost approximately US$350 million, the new pipeline will carry around 350,000 bpd of crude between Bahrain and Saudi Arabia to replace the existing one that carries 230,000 barrels. Over the years, Bahrain has been in talks with Iran and Qatar for securing gas supply, but not much progress has been made. Talks with Iran are now frozen after the two countries disagreed on the price and the government is now considering importing gas from Turkmenistan or Russia. As part of its plans to secure its long-term energy requirements, the government is open to the import of Liquefied Natural Gas (LNG), which would entail the development of a gas receiving terminal and pipeline infrastructure to deliver gas to the end users. National Oil and Gas Authority (NOGA) has already conducted the feasibility study for the Kingdom’s first LNG receiving terminal and the government will pick the winning bidder for a $1 billion project by the end of this year. The LNG project envisages the construction of a ship unloading system complete with LNG storage tanks, a ‘regasification’ and send out system, marine works, a jetty and other associated works. Once realised, the Kingdom hopes to solve its power outage during the summer as well as have adequate energy for its planned industrial expansion. Above all, it will enable Bahrain to become the region’s hub for petroleum and associated logistic services. xxxxx Over the next five to seven years, the government has ambitious plans to triple production from the Awali field, to at least 110,000 bpd, around which production will remain stable until 2028 Environmental concerns remain the key behind every decision made by the National Oil and Gas Authority, in line with the global move towards cleaner and higher quality products. The government believes Bahrain must look for opportunities to upgrade products and increase revenue, as well as minimise carbon emissions. Bapco is currently commissioning new plants under a US$1 billion modernisation programme designed to reduce the sulphur content to enable it to meet current environmental standards. Long active in the traditional areas of refining, extraction and marketing of oil production, Bapco has now decided to foray into uncharted territory — the manufacture of petroleum products. This year saw the inauguration of Bapco’s US$450 million lube oil plant with which Bahrain seeks to develop an international and local market for its own very brand of lube oil. This plant will annually produce around 400,000 metric tons of grade III high-viscosity index lubricant base oil, a raw material for finished lubricants used in high-performance vehicles. The project is part of Bapco’s joint venture with Finland’s Neste Oil and Nogaholding. Bapco will be working closely with the automobile industry to develop the local market for its own brand of lube oils in the coming years. The company has set up a team to develop a retail business within its marketing division. As the refining and petrochemical industries grows at a rapid pace, Bahrain seems to have realised the need to leverage the latest technology so that the Kingdom can compete with the best in the industry — but in a cost-effective, efficient and environmentallyfriendly manner. Untapped potential downstream annualreview
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