A lack of feedstock isn’t holding back Bahrain’s plans to increase its refinery capacity.
Compared to its hydrocarbon-rich neighbours, the Kingdom of Bahrain is relatively poor in natural resources and this has impacted its downstream sector development.
The sector is left wanting when it comes to adequate petrochemicals production – Bahrain has one small refinery along with a petrochemical plant owned equally by Saudi Arabia, Kuwait and the Bahraini government.
Currently, Bahrain secures its crude oil mainly from the 300 000 bpd Abu Saafa offshore field, operated by Saudi Aramco and the output is shared on a 50/50 basis between Saudi Arabia and Bahrain, representing 82% of the country’s oil production.
The country’s Bahrain Field also contributes a further 32 000 bpd. Bahrain also imports 230,000 bpd from Saudi Arabia via pipeline from Abqaiq via Dhahran to Bahrain refinery in the Sitra region.
With the soaring domestic demand on oil derivative products, Bahrain has started ambitious plans to increase its current crude output and hence, increase its refining capacity.
The island Kingdom aims to increase the production capacity of its Bahrain Field to 100 000 bpd according to Oil and Gas Affairs Minister Dr. Abdul Hussain Mirza.
“We aim to increase production from the Bahrain Field with Tatweer Petroleum through employing better and more modern methods to drill in order to reach 100,000 bpd,” says Dr. Mirza.
“We also aim to increase the amount of crude oil imported via pipeline from Saudi Arabia to 350,000 bpd as opposed to the current 230,000 bpd,” he says.
Bahrain aims to use the existing reception facility for crude oil coming from Saudi Arabia rather than building a new one. “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,” says Faisal Al Mahroos, CEO of Bahrain Petroleum Company (Bapco).
The increase of crude availability aims to increase the refining capacity of the Kingdom. The current refining capacity of Bahrain is 267,000 bpd according to National Oil and Gas Authority (NOGA) figures, and it processes 85% of the oil imported from Saudi Arabia.
Domestic consumption of refined products from the Sitra refinery stands at 25,000 bpd, while the rest is destined for export to international markets which require stringent environmental specifications to be met.
“More than 90% of our products are destined for export,” says Mohammed Hassan Mezal, manager of the refinery operations planning at Bapco.
The stringent international requirement of the content of sulphur in refined products, mainly diesel, led the company to upgrade its refinery to produce diesel of 10ppm grade.
“With the commissioning of the ultra low sulphur diesel (ULSD) project late in 2008, the Bapco refinery became capable of producing the most stringent diesel qualities in the world,” says Mezal.
“Our first shipment of 10 ppm diesel left the Refinery destined for the Singapore market. We also had interest from Europe and Japan,” he adds.
To boost its refining capacity, Bahrain launched a refinery master plan last year which aims to increase the refining capacity of Bahrain to 500,000 bpd from its sole refinery at Sitra.
To execute these projects, Bahrain launched a multibillion dollar investment plan in the upstream and the downstream sectors for the next five years.
“Our strategic investment over the next five years will be approximately US$5 billion, depending on economic circumstances,” says Al Mahroos.
“The refinery master plan envisages the expansion of the refinery to some capacity between 350,000 to 500,000 BPCD,” says Al Mahroos.
“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,” he adds.
The refinery master plan also aims to improve the quality of gasoline produced in Bahrain.
“Our gasoline situation is somewhat different than the diesel specifications. 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,” says Al Mahroos.
Though Bapco announced the launching of the refinery master plan, the progress is still slow. “The Bapco methodology and process requires that each major project undergoes thorough scrutiny to ensure that the right decision is made at the right time,” says Mahroos.
“With world demand being depressed in the next few years coupled with the fact that new refining capacity is being built, we do not see urgency to expand this refinery.
Our decision to go ahead with the project will be based on an assessment to enter the market at a time when the refining cycle is on an upswing,” he explains.
While Bahrain’s refining sector is finding its way, and to match the same level as Saudi Aramco, which has a refining current capacity of 500,000 bpd (compared to 590,000bpd in 2005), the petrochemicals industry in Bahrain is still immature, as the country does not have a petrochemical plants of its own.
The jointly-owned fertiliser, Gulf Petrochemical Industries Company (GPIC), is Bahrain’s only claim to domestic petrochemicals production. It is 33% equally owned by Saudi Basic Industries Corporation (SABIC), Petrochemical Industries Company (PIC) and the government of Bahrain.
GPIC produces mainly urea, ammonia and methanol, and consumes about 80 million cubic feet per day of natural gas, sourced from domestic fields.
“We use Khuf gas from Bahrain Field,” says Zuhair Tawfiqi, manager at GPIC.
The company is also a frontrunner for allocation of an additional 95 million cubic feet of gas to be used for plant capacity expansion. “The expansion project has been planned already and is awaiting the allocation of gas. Once that is decided, it can go ahead,” says Dr. Mirza.
The minister said the expansions, which will nearly double the company’s existing capacity, will also mean at least 250 more jobs being created at the company and 2,000 contractor jobs during the construction process.
Looking ahead, Bahrain aims to focus more on the downstream sector, and to focus its investments on it according to Dr Mirza.
“Here in Bahrain, NOGA regularly reviews its strategies to shape the refining and petrochemical industry to ensure that all the companies under its umbrella continue to provide a strong economic base for the country and are in line with Bahrain’s “Economic Vision 2030.”
International acquisition
Bahrain-based investment bank Capital Management House (CMH) and the business and investment arm of Bahrain’s National Oil and Gas Authority (NOGA) have formed a joint venture (JV) to buy a controlling stake in a Norwegian-owned and Bahrain-based petrochemical logistics business.
The buyers have acquired 30% and 35%, respectively, in Skaugen Gulf Petrochem Carriers (SGPC), which was formed by Norway-based I M Skaugen (IMS) and began operations in November 2009.
SGPC owns and operates ethylene, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) carriers. The company operates as part of a joint pool of transportation vessels serving the petrochemicals producers of the GCC region.
