Faisal Al-Mahroos, chief executive officer of the Bahrain Petroleum Company (Bapco) talks about a $5bn investment plan for the island Kingdom’s refinery sector.
While neighbouring GCC countries like Saudi Arabia, Qatar, Kuwait and UAE are enjoying an abundance of proven oil and gas reserves, the Kingdom of Bahrain is relying on imports from Saudi Arabia, and struggles to increase the output of its aging oil fields.
This has forced Bahrain to look at different options to meet the increasing domestic demand for petroleum derivative products and to keep its refineries operational as it exports its products into the international market.
All of the above activities are the responsibility of the Bahrain Petroleum Company (Bapco). Refining and Petrochemicals Middle East met Faisal Al-Mahroos, chief executive officer of the Bahrain Petroleum Company (Bapco), and discussed the issues relating to the operation of his company.
Bapco is in charge of the upstream and the downstream activities in Bahrain, and it exports around 85% of the output of the ancient Sitra refinery, built in 1936 and located south of Manama. Bahrain’s only refinery, it processes crude oil from the Awali field and Saudi Arabia’s Abu Saafa offshore field.
To ensure the steady flow of crude oil and feedstock for its refinery, Bapco launched projects to enhance output from its upstream fields.
“We initiated a large gas injection project during the early stage of the Bahrain field development to maintain the pressure in the main Mauddud Cretaceous reservoir. We also implemented an enhanced gas recovery project to maximise the recovery of rich Arab gas by displacing it with the lean Khuff gas,” says the CEO.
“We also conducted many pilot enhanced oil recovery projects like the application of down-hole heaters, surfactant flooding and water flooding.”
The company is also joining forces with Nogaholding, Occidental Petroleum and Mubadala (Tatweer Petroleum) to increase the number of EOR projects in the Kingdom. “This includes a thermal recovery processes for both heavy and light oil reservoirs, water flooding and light oil steam flooding,” says the CEO.
In addition to boosting the capacity of its oil fields, Bapco intends to increase crude imports from Saudi Arabia to around 350 000bpd from current 230 000bpd, but it doesn’t plan to set up new terminal to store the extra crude. “We do not anticipate the need to build additional tankage to the one we already have in service. The incremental crude run will be catered through the current system,” he explains.
To execute these projects, Bapco launched a multibillion dollar investment plan for the next five years. “Our strategic investment over the next five years will be approximately $5 billion, depending on economic circumstances,” says Al-Mahroos.
Due to the importance of the refining sector in Bahrain and the increase of local demand on refined products, the government have also created a refining master plan.
“As part of the refinery master plan, we envisage increasing the crude capacity of the refinery from the current capacity of 267 000bpd to somewhere between 350 000 to 500 000bpd depending on final economics,” he says.
“The feasibility study for the project has been completed internally last year, and since then a reputed international company is assisting the Bapco team in formulating the preferred configuration and the optimum size of the refinery. Different upgrading technologies are under consideration,” says Al-Mahroos, who does not reveal the name of assisting company.
The time frame of developing the refining master plan is not clear yet, but Bapco is actively studying the development of the project. “The refinery master plan is still under active study. Our methodology and process requires that each major project undergoes thorough scrutiny to ensure that the right decision is made at the right time,” says Al-Mahroos.
Bapco have not been idle in the past. In 2009, the company signed a technology license with Chevron Lummus Global (CLG) for a new hydrocracker technology. GLC is currently studying different options to enhance the capacity of the refinery from its present 267 000 b/d.
The increase of Bapco’s crude output will give the company the option to either expand its existing refining facilities, or to build a new refinery.
“The increased production from the Bahrain field coupled with increased throughput capacity through the Saudi Arabia – Bahrain pipeline means that there could be scope in building another medium sized refinery on the island,” says Al-Mahroos.
“It is conceivable that this refinery could be a joint venture between the private sector or other entities such as IOCs. This idea is under consideration, but the long term plans are usually influenced by many factors affecting the industry and are thus decisions will be made at a much later.”
“But we do not see urgency to expand our refinery. Our decision to go ahead with establishing a new project will be based on an assessment of the market. We want to enter it at a time when the refining cycle is on an upswing,” he affirms.
Meeting Specifications
Though the company does not want to rush into establishing a new refinery, Bapco is taking measures to improve product quality, in an effort to meet the stringent international requirements. Bapco owns one of the few GCC refineries with the capability to export large quantities of ultra-low sulphur diesel.
“With the commissioning of our ULSD project late in 2008, the Bapco refinery became capable of producing the most stringent diesel qualities in the world. Our first shipment of 10 ppm diesel left the refinery destined for the Singapore market. We also had interest from Europe and Japan,” says Al-Mahroos.
The company has also inaugurated a major environmental compliance project at the Bapco refinery, the Refinery Gas Pesulphurisation Plant (RGDP).
“The US$151 million RGDP project is one of the most important and complex environmental projects ever undertaken by Bapco, and is part of a 10 year environmental compliance programme developed by the company in 2000 in collaboration with Bahrain’s general directorate of environment and wildlife protection,” says the CEO.
The RGDP will reduce hydrogen sulphide in fuel gas to less than 150 parts per million (ppm), significantly less than the Government’s environmental regulation limit of 600 ppm.
Meanwhile, the company is still working on meeting stringent gasoline requirements. “Our gasoline situation is somewhat different. The refinery master plan is also addressing the issue of gasoline quality, to enable Bapco to manufacture the product when it is required in the market.”
Bapco ships product to different clients around the world, but most of the customers are located in the Middle East and Africa.
“With our capability to produce products of the highest required quality, our reach will extend into the European and perhaps even the North American markets,” predicts Al-Mahroos.
“With China and India becoming the engines for petroleum product demand, it is natural that we may participate in those markets as well, if we can supply them in a competitive and economic fashion.” Similar to other national oil companies, Bapco faces a range of challenges, says the CEO.
“Bapco’s challenges can be summarised into the following broad categories including challenged profitability, environmental pressures, shortage of skilled resources as well as a reduced financial resources for investment.”
Al-Mahroos believes his biggest challange is to fully translate Bapco’s desire for excellence into reality, something he cannot achieve on his own. “This statement covers all the stakeholders in our business, our shareholder, our business partners and our communities,” he concludes.
