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Bahrain’s biggest oil find since 1932 may change the country’s fortunes

13/06/2018 0 34 views

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DUBAI – “ASWAQ”

Bahrain announced in April that it has struck upon its biggest oil in nearly 90 years, the country’s official news agency (Bahrain News Agency) reported the discovery of “highly significant quantities of oil and gas” located in Khaleej al-Bahrain basin, off the country’s west coast.

Bahraini Oil Minister Shaikh Mohamed bin Khalifa al-Khalifa told the agency that it is the largest find since 1932 and is said to “dwarf” Bahrain’s current reserves. He said the find which resulted following an order to intensify the search for deposits of crude, “is at substantial levels, capable of supporting the long-term extraction of tight oil (light crude) and deep gas.”

Tight oil is a type of oil found in impermeable shale and limestone rock deposits. Also known as shale oil, tight oil is processed into gasoline, diesel, and jet fuels in the same way as conventional oil, but is extracted using hydraulic fracturing, or “fracking.”

The tiny Arab Kingdom of Bahrain is the smallest oil-producer in the region with just 125 million barrels of proven oil reserves compared to Saudi Arabia’s 266 billion barrels. It receives revenues from two oil fields, the onshore Awali field, and the offshore Abu Safah. The country is sandwiched between the oil-producing powers of Saudi Arabia and the United Arab Emirates (UAE), and it currently splits revenue from the Abu Safah oilfield with Saudi Arabia under a 1958 agreement, according to the US Energy Information Administration (US EIA). Unlike its closest neighbours, Saudi Arabia and Qatar, Bahrain is not a major oil producer and ranks 57th on the US EIA’s world list.

The petroleum industry consultants, DeGolyer and MacNaughton (Demac), who verified the find, said the project “breaks new ground” for the industry. The  tight oil was discovered in the offshore Khalij al-Bahrain Basin, which spans some 2,000 square kilometers (770 square miles) in shallow waters off the country’s western coast. The field contains 80 billion barrels of oil in place, and 13 trillion cubic feet of natural gas.

If 10% of the oil in place proved recoverable with existing and future techniques, it would make the field one of the 30 to 40 largest operating oilfields in the world. Rates of production for a field with 8 billion barrels of recoverable oil can be between 200,000 and 600,000 barrels per day; Bahrain, under these assumptions, could increase its oil production by a factor of two to four. Some fields have much larger shares of recoverable oil as a fraction of oil in place.

The volume of natural gas discovered, as quoted by the minister, is also significant, though less impressive than the oil discovery. A 12 tcf field may be able to feed an export project of 1 bcf per day. It would correspond to Myanmar’s exports to Thailand, a tenth of Qatari exports or a twentieth of Russian exports to Europe. At current liquefied natural gas (LNG) market prices, the gross value of the revenues would be about US$2.5billion per year. At this stage, though, the 12 tcf figure and the 1 bcf per day production rate should be treated as highly speculative.

Oilfield technology companies Schlumberger and Halliburton are said to be working on the discovery, drilling appraisal wells that will reveal information about recoverable reserves and the likely cost of developing them. On the basis of this information, Manama will negotiate contracts with oil and gas companies, which will develop and exploit tranches of the giant field. At best, it will take years for hydrocarbons to reach the market.

The Gulf state currently pumps around 45,000 barrels per day (bpd) and more than 1 billion cubic feet (28 million cubic meters) of natural gas daily from its one onshore Bahrain Awali Field. It obtains a further 150,000 bpd from the offshore Abu Safah oilfield, which it shares equally with Saudi Arabia.

Although Bahrain is not a major oil producer, the new find is said to have the potential to significantly raise the country’s profile and boost its economy, which has suffered double blows in recent years from lower oil prices and years of unrest and protests by some of the country’s majority Shiites.

The country has introduced some austerity measures to limit spending and boost revenue, including reducing some fuel subsidies and increasing taxes. Like Saudi Arabia and the United Arab Emirates, it introduced a 5 percent value-added tax this year to most goods and services.

By contrast, nearby Qatar produces 1.5 million bpd. Despite its modest output, Bahrain generates about 80 percent of its revenues from oil. There was no word so far on an expected start date for production. Nevertheless, experts and officials said they expect the newly discovered oil field to be ‘on production’ within five years.

Bahrain is the smallest producer of hydrocarbons in the Gulf Cooperation Council (GCC), which also includes Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Bahrain is the only GCC country that is not a member of OPEC.

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