Bahrain's Oil and Petroleum Industry Plays Catch-Up with $3 Billion Projects

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Bahrain's oil minister, Sheikh Isa bin Ali Al Khalifa has said that, in addition to $800 million of projects currently underway in the country's oil and petrochemical sectors, a further $2 billion of investments in the sector are in the pipeline under feasibility study or at the planning stage.

The projects include a $1.2 billion project to increase the output of the Abu Safa oil fields, a new $1.4 billion petrochemical complex, and a $100 million naphtha separating unit which will include lubricating oil. There is also a plan to redirect the Bahraini-Saudi oil pipeline at a cost of between $37 million and $76 million. During 2003, projects representing an investment of $125 million have been completed.

One of the key projects, the $685 million LSDP (Low Sulfur Diesel Production) project, is scheduled to start construction at the beginning of 2004. LSDP will dramatically reduce levels of sulfur in Bapco (Bahrain Petroleum Company) diesel and bring the product into line with international standards. (PEC: 92200002/3/8/12/17/23/24/25/27/28/29/30) Three companies are bidding to work on the LSDP development. They are UK based American firm International Bechtel Company (San Francisco, London), French based Technip (NYSE:TKP) (Paris, France) and Japan's JGC Corporation (Yokohama, Japan). The Bahrain Tenders Board received quotes ranging from $431.6 million to $462.15 million for the initial phase of work.

The project will reduce sulfur levels in Bapco diesel from 7,000 ppm to 10 ppm. Diesel accounts for 35% of Bapco's production and contributes a major chunk of the company's revenues.

"We will be able to sell our product on the open market and generate additional finances," said Hussain Tadayon, Bapco's acting chief executive. "Conversely, we cannot continue to produce this level of sulfur in diesel for future markets - the market will not accept it. Refineries worldwide have to meet these specifications if they want to stay in business," he said to TradeArabia News.

With engine manufacturers driving low sulfur diesel requirements for environmentally friendly cars Tadayon said that LSDP would allow Bapco to enter European and Asian markets whereas currently they are limited to the Middle East and Africa.

As major contributors to the national economy Bahrain is focusing on projects upstream and downstream in the oil and petrochemical sectors. The government is encouraging local and international private investment to increase production and efficiency and produce new products such as petrochemical base stock. The plan is for optimum utilization of current resources and the drilling of new wells and the continuation of the exploration program both onshore and offshore.

Twenty-three fields were drilled in the last two years after an agreement was signed with ChevronTexaco (NYSE:CVX) (San Ramon, California) and Malaysia's Petronas (Kuala Lumpur) in 2001. A program to increase the production of gas will see eight new fields drilled costing $103 million . This project and refinery modernization are both scheduled for completion by or during 2007, according to oil minister Sheikh Isa.