Bahrain’s grand plan: Abdul Hussain bin Ali Mirza

Casual upstream observers will have been blinded by the streaming news from Qatar, the regional gas revolution, and of course most recently Iraq. But Bahrain’s energy evolution is currently undergoing its most exciting E&P phase in more than seven decades. Four offshore exploration and production sharing blocks have been allocated, and deep gas drilling will kick off next year.

In addition to the exciting new gas developments, a host of enhanced oil recovery techniques are soon to be deployed to not only halt decline, but actually increase production at the country’s 80-year old Bahrain Field.

To hasten progress in the energy sector, Bahrain overhauled the management structure governing its entire oil, gas refining and fertilizer production industries. The National Oil and Gas Authority (NOGA) was born when three ministries were streamlined into one body by Royal Decree in 2005.

Guiding the authority, and entrusted with the whole energy remit in the Kingdom is Dr. Abdul Hussain bin Ali Mirza, chairman of the Authority and Minister of Oil & Gas Affairs.

Dr. Mirza shared his vision and passion for Bahrain’s energy prospects exclusively with Oil & Gas Middle East from NOGA’s headquarters in Manama.

A deep gas Exploration and Production Sharing Agreement (EPSA) was signed in February 2011 with Occidental Petroleum (Oxy) and was ratified by His Majesty – the King in October 2011.

“Oxy are now carrying out geological, geophysical, and engineering studies for the purpose of design and selection of deep drilling locations. The drilling of the first well, out of three deep exploratory wells, will start sometimes in the middle of 2013 and the first exploratory phase of the project will be completed by the end of 2015,” reveals HE Mirza.

Thanks to the technological advances which have taken place in upstream engineering, the Minister is confident the Oxy project will yield exciting results.

“Great strides have taken place in the fields of geophysical imaging, computer technologies and instrumentation since Bahrain last embarked on a major exploration project. Partnering with technologically advanced and experienced companies such as Oxy augments the likelihood of a successful strike,” he says.

In 2010 NOGA was instrumental in bringing together nogaholding, Occidental Petroleum and Abu Dhabi’s Mubadala Development Corporation to form Tatweer Petroleum, a landmark joint venture between international players.

“The primary objective of this JV is to revitalise the ageing onshore Bahrain field by the adoption of state-of-the art enhanced recovery technologies. This initiative will treble the indigenous crude production by 2017 and will double the domestic gas production to 2.7 billion cubic feet a day,” reveals HE Mirza.

Bringing such a feat online does not come cheap. Indeed, current estimates for the oil and gas developments overseen by Tatweer are in the region $15 billion worth of investment over the coming two decades.

“The crucial factor here is that the bulk of that fiscal investment will be invested by foreign companies to develop Bahrain’s national resources,” he adds.

Since its inception two years ago, Tatweer has drilled approximately 238 development wells – a number which represents a significant achievement when compared to the total of 800 wells that were drilled during the entire period between 1932 and 2010.

“This activity resulted in an increase of 50 % in the production of domestic oil over the immediate pre-Tatweer period. It is envisaged that by during the next 20 years, some 3,600 new development wells will be drilled on the island to increase the production of oil and gas,” reveals HE Mirza.

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Gas Focus
Before the inception of the Tatweer partnership, international estimates of Bahrain’s natural gas production averaged around 444 billion ft3 per year.

“The activities of Tatweer Petroleum have led to an increase in gas production by 1.5% to just over 450 billion cubic feet per year during 2010-2011,” reveals the Minister.

“Most of the incremental gas was supplied to the power generation sector to cater for the increased demand for power in the Kingdom. We envisage that ultimately the production of gas will double within a decade,” he adds.

To meet its increasing gas needs Bahrain is intensifying its search for both conventional and unconventional gas, though the Minister is keeping the projected potential yields close to his chest.

“The search for unconventional gas is still in the exploratory stage in the Bahrain field. To date we have not yet identified any shale or other unconventional gas reserves.

Based on some previous work we have developed some preliminary estimates for the possible unconventional gas resources in the Bahrain field. These figures will be confirmed with the proposed three deep gas exploratory wells next year.

Bahrain shares an important offshore oilfield with Gulf neighbor Saudi Arabia, namely Abu Saafa.

Bahrain’s share of production has traditionally been sold directly on spot markets. In recent years the production of the field has leveled at around 300,000 barrels per day, but the business model has changed somewhat.

“The Kingdom of Bahrain’s entitlement of 50% (or 150,000 barrels per day) was sold on the international market. What is significant, however, is that our customer base has shifted from the past patterns, where Abu Safah was primarily sold to international majors and Japan.

In the past few years we have entered into contracts with some of the major refiners. This is due to the desirability of competitively priced crudes such as Abu Safah for the high conversion refineries coming up in Asia in general,” says HE Mirza.

2012 marks a milestone heralding its 80th year of commercial oil production. “It is very pleasing on this anniversary that we can announce, after all these years, Tatweer engineers have extracted samples of two new grades of heavy crude oil from the Rubble formation. We are hopeful that the commercial production of this crude will commence in the near future,” he says.

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IOC opportunities
In its quest for greater energy revenues, vital to fuel its domestic economy, the Minister says Bahrain has embarked on several initiatives to attract foreign companies to explore, develop, and hopefully discover oil and gas in four offshore blocks covering a total area of nearly 8000 square kilometres.

“The initial floating of the bid attracted interest from 11 of the largest international energy companies spanning the globe. This keen interest on the part of the international investment community is a testimonial of the prestige Bahrain has as a trustworthy business partner and as a destination of choice for investment capital.”

Crucial to turning that E&P interest into major discoveries, the willingness to participate also denotes confidence in the discovery potential in Bahrain’s offshore waters.

“Three of the offshore blocks have been awarded to Oxy of the US and one to PTT Exploration and Production of Thailand. Exploration and Production Sharing Agreements (EPSAs) have been signed with these two companies and exploratory wells are being drilled and will be drilled by them,” he says.

Looking ahead, and potentially abroad, HE Mirza reveals that the formation charter of nogaholding provides it with the authority to enter into energy related joint ventures, both domestic and international.

“Should a desirable and value-adding opportunity present itself, nogaholding would participate in it, wherever the prospect exists.

Bapco and Banagas, as operating companies would not participate directly, but they would provide their technological know-how and expertise in the evaluation and implementation of any nogaholding initiatives. Bahrain will entertain any ideas that are mutually beneficial to both parties,” reveals the Minister.

Year in review
Oil and Gas Middle East met with HE Mirza at a sensitive time for the country, and global media attention had once again turned to the streets of Manama on the first anniversary of the protests which sprang up in the wake of civil disturbances in Tunisia, Libya and Egypt.

One year on, HE Mirza says the company’s operations remain largely undisturbed by the incidents, and remarkably the organisation managed to fulfill its international sales obligations.

“I am pleased to declare that, fortunately, the fateful events that took place in the Kingdom during the early part of 2011 did not significantly affect any segment of the energy supply chain. The upstream segment of the business operated normally throughout the period, increasing the production of domestic crude as per our original plans.”

Whilst the refining sector did experience a minor reduction, however the impact is hard to judge as the period coincided with a major scheduled shutdown in some plants of the refinery. “Overall, at years-end, the lost production was recovered and in fact the annual planned throughput was exceeded by 50,000 barrels.”

The international market was supplied on time and no vessel loading delays were experienced during this period from either the Bapco or Banagas sides, he explains.

“Even the distribution of fuels to the island’s service stations was accomplished without undue delay and no shortages were experienced.

All power stations, as well as the domestic industrial gas customers were supplied normally. The airport was also supplied with all of the aviation fuel requirements, without any delays being encountered,” says the Minister.

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Local Focus
NOGA and the NOGA family of companies, the Minister says, are guided by the aspirations and goals of Bahrain Vision 2030. That Vision calls for the development of the citizens of Bahrain as one of the backbones of the program.

“We at NOGA vigorously pursue this vision and our companies spend upwards of 10 million of Bahraini Dinars per year on training staff to attain the skills necessary to run the Bahrain economy of tomorrow.

One of the aims of the vision is to provide opportunities to Bahrainis and the NOGA companies are striving to increase the number of Bahrainis in our workforce.”

The short and medium term strategies for the NOGA group of companies hinge on the four themes that, HE mirza says, are key objectives towards the meeting the goals of Bahrain Vision 2030.

“Of course, the satisfaction of our Kingdom’s demand for energy is a priority. The initiatives that are covered under this theme are designed to ensure that the energy needs of the nation are satisfied at all times, to enable our economy to grow,” he says.

“Additionally we want to transform Bahrain into a regional hub for oil and gas activities.” This initiative addresses the strategic issue of availability of skilled manpower in the oil and gas sector, and will be achieved through a renewed focus on upskilling and training Bahraini nationals in key oil and gas functions,
he outlines.

“The third pillar of our strategy is to grow and further diversify the domestic oil and gas business. This policy objective addresses the strategic goal of improving the competitiveness of the Kingdom’s oil and gas industry.

The objectives will be achieved through several initiatives, most prominent of which are the Refinery Master Plan, planned expansions at Banagas and venturing into petrochemical activities.”

The final objective is focused on general business quality, and comes under the broad masthead of achieving operational and commercial excellence.

“Ultimately this policy addresses the topics of improving business processes to achieve international quality, safety, health and environmental standards. These activities will make the Kingdom’s oil and gas and related business more efficient and therefore more competitive,” says the Minister.

Great expectations
With a current estimate of 125 million barrels of proven recoverable oil reserves, plus 3.25 trillion cubic feet of natural gas, coupled with a renewed commitment to making oil and gas a central pillar of economic growth, the opportunities to work with NOGA are tempting.

The future for Bahrain’s upstream community looks bright, and the opportunity landscape for firms which can help Tatweer Petroleum reach its ambitious targets is as good today as it has been at any time in the country’s eight-decade history of energy production.
“We are extremely hopeful that the exploratory wells that will be drilled in the offshore concessions will bear fruit and will add to the natural resource reserves of the nation.

For our Kingdom, oil and gas will continue to play as important a role in the future as in the past and concerted efforts will be made during 2012 and beyond to increase the natural resources discovery and production,” HE Mirza concludes.