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Country Focus: Bahrain attempts energy sufficiency

by Yasmin Helal on Mar 14, 2017

When its first oil well was spudded in 1931, Bahrain became the first oil producing nation in the Gulf region. Just three years later, the Kingdom had already begun exporting oil. It wasn’t until 1970 that the country’s oil production peaked to reach 79,000 barrels per day (bpd). Shortly after these initial prosperous days, Bahrain’s output started to decline and in 2009 the nation’s oilfields produced as little as 32,000 bpd.

Today, oil production in the Kingdom, which is not a member of the Organisation of the Petroleum Exporting Countries (OPEC), is no longer sufficient to meet domestic demand. The main oil output comes from its share of the 300,000 bpd-capacity Abu Safa offshore oilfield, which Bahrain shares with Saudi Arabia.

The rest comes from the onshore Bahrain Field, previously known as Awali, which the Kingdom is banking on to counter the decline in production. In 2009, the government launched Tatweer Petroleum, a joint venture (JV) that ‘assumed responsibility for the stewardship and revitalistion of the mature Bahrain Field and the execution of all activities related to the petroleum operations’, according to the official website. With this in mind, the government aims to increase the Bahrain Field output to reach 100,000 bpd by 2018.

Ups and downs

Indeed, Tatweer Petroleum did boost production, increasing yields from 27,500 bpd to 40,700 bpd between 2009 and 2011. The company completed several key enhanced oil recovery (EOR) projects to achieve these results, including 399 workovers and 220 wells acid stimulated, 9 high volume Electrical Submersible Pump installations, conversion of 7 wells to annular gas lift, and opening 165 beam pump wells to the Casing Vapor Recovery (CVR) system. However, the progress came at a slow pace with production hitting 51,000 bpd in 2015.

The low oil prices certainly did not help, particularly the impact of the cost-intesive EOR technologies. The JV’s partners Occidental Petroleum and Abu Dhabi’s Mubadala Petroleum, who were both suffering from the dip in oil prices, reportedly had been trying to renegotiate terms of the 20-year contract with Tatweer. Eventually, the partners announced that they had reached an agreement with the Bahraini government to exit the project by mid-2016.

Coping with the new norm

Negating the government’s efforts to improve production, the falling crude oil prices took a toll on the Kingdom’s energy sector. According to ratings by Fitch and Standard & Poor (S&P), the country’s fiscal vulnerability increased and was left with no support from neighbouring countries in the region.

Even though OPEC and non-OPEC members struck a deal in late 2016 to decrease output, countries with modest production like Bahrain have a long way to recover from deficits, experts say.

According to Mustafa Ansari, energy economist at APICORP, the rise in oil prices following the OPEC cuts were nothing short of the average price for the previous year, which will not have a significant impact on government revenues.

Looking forward, he said, prices are not expected to recover significantly and thus Bahrain will need to focus more on diversifying its economy and reducing its dependence on oil revenue.

“Over 80% of Bahrain’s revenues comes from oil and gas,” Vikas Handa, managing director of energy consultancy firm Beas DWC-LLC, said. “Hence the rise in oil prices have certainly helped Bahrain to a great extent, but not enough to cover the deficit. Bahrain’s production cuts of 12,000 bpd were significant given that total production was only around 50,000bpd. On the other hand, Bahrain’s domestic consumption had been increasing steadily and some estimate it to be to the tune of 50,000bpd doubling from 25,000 bpd in 2001.”


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