Bahrain is holding oil and gas development as a priority within its Economic Vision 2030 with refinery expansion, pipeline and LNG terminal projects among the top investments, writes Pipeline Magazine’s Nadia Saleem
The Gulf island state of Bahrain is moving ahead with investments in the oil and gas industry despite a global slowdown as it follows through on Economic Vision 2030, a development plan for improving the lives of its citizens, as well as overhaul power generation and increase oil production to meet future energy demands.
Unlike its neighbours in the Gulf, the Kingdom of Bahrain is a minor oil producer, with only 124.6 million barrels of proven reserves. It also has the lowest levels of oil consumption per capita in the GCC, according to Eni’s 2013 “World Oil and Gas Review.” The country’s oil is developed largely by key state players such as Bahrain Petroleum Company (Bapco), National Oil and Gas Authority (NOGA) and its investment arm, Nogaholding.
Its reserves are held in just one field, the onshore Bahrain Field also known as Awali. The government relies on oil and gas for nearly 86 per cent of its revenues. Of these revenues, roughly 80 per cent come from the 300,000 barrels of oil per day (bpd) Abu Safa offshore oilfield, which is owned and operated by Saudi Aramco but from which 50 per cent of the revenues are transferred to Bahrain. The remaining 20 per cent comes from Awali, which reached record production levels in June 2015, producing some 56,000 bpd.
Bahrain’s domestic consumption of oil has doubled from 25,000 bpd in 2001 to 50,600 bpd in 2015. On December 10, 2016, Bahrain pledged to cut around 10,000 bpd from its production in 2017 in order to prop up oil prices.
Bahrain is taking a series of steps to expand its capacity to produce and refine oil and gas, mainly through Nogaholding. In March 2016, Nogaholding announced it had signed a US$570 million Islamic financing facility (Murahaba), which will serve to fund oil and gas projects such as Bahrain’s newbuild LNG terminal.
Other projects include the expansion of Bahrain’s Sitra refinery from its current level of 267,000 bpd to 360,000 bpd. With estimates putting the cost of the expansion as high as $9 billion, it will be the largest project ever financed in the kingdom. Sitra currently refines 250,000 bpd from Saudi Arabia’s Abqaiq processing facility, which is fed by the Arabia-Bahrain (AB) pipeline. Saudi Aramco is currently replacing the old AB pipeline with a new one that will expand capacity from 230,000 bpd to 350,000 bpd and appears on a schedule to open in 2017.
In addition to the expansion of the refineries processing capacity, the project will also see BAPCO establish new petrochemical production units at the site. Bahrain also plans to build a 70 km pipeline to connect the refinery to the Ras Tanura refinery in Saudi Arabia.
“We are lucky coming into the market on the downside as it is a good time to deploy investment. It is a time to buy as contractors are hungry for business, as are suppliers so we can get the best deal,” Bahrain’s Minister of Oil Mohamed Bin Khalifa Al-Khalifa said in an interview with Pipeline magazine.
Bahrain National Gas Expansion Co. (BNGEC), a subsidiary of Nogaholding, awarded in June 2016 an EPC contract worth almost $100 million to an affiliate of JGC Corp., Yokohama, Japan, to build additional gas pipelines and storage tanks as part of a capacity expansion under way at BNGEC’s and Bahrain National Gas Co.’s (Banagas) shared gas processing project in Bahrain oil field, south of Awali.
The pipeline and storage expansion is due for start-up in October 2018.
Earlier last year, Banagas awarded a $355-million lump-sum turnkey EPC contract to JGC for the CGP-III plant, which will have the capacity to process 350 million cubic feet per day (MMcfd) of associated dry gas entrained in state-run Tatweer Petroleum Co.’s increased oil production from Bahrain field.
Equipped to produce LPG and naphtha using reinjection pressure and excess gas, the plant, once completed, will increase overall capacity at the Banagas-BNGEC gas processing project to more than 650 million MMcfd.
Banagas currently operates two gas processing trains with a combined capacity of about 300 MMcfd at the site.
Due for startup in September 2018, the CGP-III is one in a series of strategic projects aimed at securing ongoing economic growth and raising the standard of living for the people of Bahrain.
NOGA has awarded three major contracts during 2015 to serve the strategy for improving Bahrain’s oil and gas operations. These included a $600 million floating LNG terminal project, which will have a floating storage unit, an offshore LNG-receiving jetty, breakwater, and regasification platform; subsea gas pipelines from the platform to shore; an onshore gas-receiving facility; and an onshore nitrogen-production plant.
The project is a build-own-operate-transfer basis as joint venture between NOGA Holding (30 per cent) and a consortium of Teekay LNG Partners LP, Samsung C&T Corp., and Gulf Investment Corp. (70 per cent, combined).
To be equipped with an initial capacity of 400 MMcfd but expandable to 800 MMcfd, the terminal will be owned and operated under a 20-year agreement beginning in third-quarter 2018.
The other projects are a $350 million, 115-km oil pipeline from Saudi Arabia to Bahrain and a $100 million gas dehydration plan at Tatweer Petroleum’s Bahrain field.
The Bahrain field is still producing more than 80 years after its discovery, making it the oldest producing oilfield in the Middle East. Despite there not being any more discoveries, exploration work had slowly been returning to the industry, but stalled during the decline in oil prices at end-2014. Bahrain’s current energy strategy is to increase levels of production from existing fields with improved efficiency and EOR techniques.
Other than drilling deeper at existing fields, the most viable option for future E&P will be offshore or on Bahrain’s outlying islands. This is where all four of Bahrain’s oil and gas exploration blocks are located, and the kingdom had been expected to open a fourth round of exploration in an effort to discover new fields.