Manama – Bahrain: Despite the worldwide decline in oil prices, Bahrain is still heavily reliant on the energy sector for its GDP. Comprising a great share in GDP, Bahrain’s oil reserves are limited compared to other neighboring countries such as Kuwait and Saudi Arabia.
With slow oil production rates, revenues decreased and the matter of relying on oil revenues remains questionable. Amid such recurring fluctuations, the government took over several attempts of reform to inaugurate a new era of oil refinery and production in efforts to maintain a stable oil environment; however shall the reforms bring petro-regulated Bahrain to its production peaks in the nineties is dubious.
Crude oil was first discovered in Bahrain in 1931 and began exporting oil products three years after its discovery. The country has two main sources for its oil including onshore Bahrain (Awali) field which was the first to begin production in the GCC region and offshore Abu Safa Field.
Reserves
Kuwait’s oil reserves were estimated at 632.5 million barrels, according to Bahraini Energy Minister, Abdul Hussain Mirza.
While natural gas reserves stand at 3.25 trillion cubic feet (TCF) as of the end of 2016, according to data compiled by Knoema.
It is important to note that reserves figures for the country have varied greatly between different sources.
Production
Bahrain’s crude oil production has recorded 202,659 barrels per day (bpd), according to OPEC 2016 report. Additionally, in terms of Year on Year (YoY) growth for the fourth quarter of 2015, crude oil production in Bahrain witnessed a 3% increase, according to a report released by Economic Development Board (EDB). The same report highlighted more decline in YoY figures of the second quarter.
The Abu Safa field recorded 300,000 bpd while Awali recorded 56,000 bpd in June 2015, according to the Oil & Gas Year journal. The country decided to cut down 10,000 bpd from its production 2017 to boost oil prices, as part of the OPEC deal.
Consumption
An increase in oil demand has been noticeable in Bahrain as it recorded 1,054 bpd on world oil demand in 2016 compared to 998 bpd in the previous year, emphasizing a 5.6% change according to OPEC report. The country records 1,642 bpd in 2016 in the world demand on gasoline compared to 1,603 bpd in the previous year, emphasizing a 2.4% change.
The country has taken adjustment procedures in prices of fuel in 2016 to diversify the economy by the increasing fuel prices. The regular gasoline grade (RON 91 octane) has increased from 80 fils per liter to 125 fils per liter while the premium gasoline (RON 95) has increased from 100 fils per liter to 160 fils per liter according to the Oil and Gas News Worldwide (OGN). The increase in prices contributed to additional revenues and obliged the public to choose their suitable fuel wisely; for example the premium gasoline used to consume 65% of the total gasoline consumption, however after the price adjustment the consumption decreased to fewer than 40% of the total gasoline consumption.
Bahrain’s refinery manages to refine over 260,000 barrels of crude oil daily and stores 170 tanks at different sites holding a total capacity of 14 million barrels, according to the National Oil & Gas Authority (NOGA).
Exports and imports
Bahrain imports a total of crude oil records 246.4 bpd in 2016 compared to 211.1 bpd in the previous year, emphasizing a 16.7% change; however the country managed to record 781.6 bpd in 2016 in world imports of petroleum products compared to 711.8 bpd in the previous year, according to OPEC 2016 report.
Bahrain’s exports of petroleum products recorded 250.8 bpd in 2016 compared to 248.6 barrels per day in the previous year, emphasizing a 0.9 % change according to the report. OPEC’s 2016 report. Percentage of crude oil exports by region increased in the Middle East by 55% in 2016.
Government growth strategy
The country’s ministry of energy mainly operates the energy sector by either entirely owning the key countries in the sector or owning a great interest in them. The state operates most of the gas industry investments, production of refined lubricants and oil exploration.
Bahraini government seeks to implement measures to tackle challenges in the hydrocarbon sector and foster growth. These new strategies include the adoption of a new natural gas pricing policy, where the new gasoline sales price was approved in January 2016 in efforts to boost government oil/ gas revenues and improve energy use efficiency, according to EDP.
Bahrain is approaching further measures to produce and refine oil and gas, where Noga holding, the National Oil and Gas Authority (NOGA) a government-owned oil company has signed a $570 million structure that will fund oil and gas projects such as the LNG terminal that will be finalized in 2018 and expansion of Sitra refinery from 267,000 bpd to 360,000 to bpd, marking two of the country’s major projects.
The country is adapting a counter-cyclical spending approach which is designed to increase refinery capacity and secure oil supply to produced aluminum smelters, petrochemical factories, power stations, and desalination plants according OGB’s 2017 report. This approach will stabilize the economy in the upcoming years.
In efforts to implement refinery capacity expansion, the Bahrain National Gas Expansion Co. (BNGEC) has partnered with JGC Corp., Yokohama, Japan to construct more gas pipelines and storage tanks, according to the Oil and Gas Journal. The project is expected to increase the overall capacity at the Banagas-BNGEC gas processing to more than 650 million standard cubic meters.
Market challenges
One of the main challenges in the oil industry incurs from unpredictable oil process fluctuations that can remain consistent. Most of the unpredictability in oil revenue translates in the fiscal balance on the short term which causes difficulties in the conduct of fiscal policy, according to an IMF report. Bahraini policy makers also encounter the instability of oil reserves and the important aspect of meeting needs of current and future generations.
The best way to tackle these challenges is to decide how much to save and how much to spend from oil revenues, the report suggests.
Future outlook
One of the country’s major projects include a $350 million oil pipeline from Saudi Arabia to Bahrain that will meet the increasing demand of crude oil; the pipeline that enhances of its 267,000 bpd refinery at Sitra on the country’s eastern coast.
Another project included a $100 million gas dehydration plant located at Tatweer Petroleum’s Bahrain field built by Petrofac which accommodates the rising demand of gas.
Some of the industry trends included technical solutions adapted by oil refiners such as upgrading bottom of the barrel technology to white products to improve profitability according to Trade Arabia. The trends discuss the entire adaptation of the residues of all crudes that led to flexibility and a noticeable financial performance.
Market players
One of the leading companies in the oil sector is Bahrain Petroleum Company (BAPCO) which is owned by government and hold full right of exploration and production, refining and sale of the country’s crude oil, gas, and petroleum products. Another company is Bahrain National Gas Company (Banagas) which is known for processing gas from Bahrain field for export purpose and also provides a gas supply to Aluminium Bahrain and Riffa Power Station.
Bahrain Aviation Fuelling Company is a leading oil supplier that focuses on supplying fuel to the country’s airport and is 60% owned by Nogaholding. Skaugen Gulf is another company specialized in hydrocarbons and has a 33.3% share of the equity of Gulf Petrochemical Industries Company.
A prominent oil company is Tatweer Petroleum which was established in 2009 as a joint venture between US firm Occidental Petroleum Corporation, Abu Dhabi-based Mubadala Development Company, and Nogaholding. The company has fostered production and incurred yields that increased from 27,500 bpd to 40,700 bpd between 2009 and 2011.
Tatweer Petroleum is implementing eight projects including six projects that will manage water flooding while the other two will make use of steam flooding, according to the IMF report.
Bahrain’s Gulf Petrochemical Industries Co. is one of the country’s vibrant exporters as it managed to export 29.7 million total products worldwide.
The decline in oil prices impacted major oil-producing companies such as Bahrain; however anticipated oil and gas recovery approaches along with support from neighboring countries, the country is expected to be back on track to its usual production performance.
By Fatma Khaled
