Experts are unanimous in their opinion that Bahrain, due to its limitations on oil production, has been focussing more on strengthening its downstream capabilities, and heavily relies on Saudi Arabia for importing oil for its refineries.
“Bahrain has only (about) 615mn barrels of oil reserves. Therefore, the potential to increase output is limited. However, its investment in the refining sector accounted for more than 60% of its total export revenues in recent years. BAPCO (Bahrain Petroleum Company) is modernising its refining sector in order to produce low diesel fuels,” Ehsan Ul-Haq, senior oil market consultant at London-based KBC Energy Economics, told Oil & Gas Middle East.
“Building new refineries is part of a wider initiative to integrate the crude, refining and petrochemical industries to create more value added. As well as increasing the availability of feedstock, the use of refined products provides opportunities to produce more sophisticated petrochemical products that are essential to extend the value chain,” Ghassan Alakwaa, energy research analyst at APICORP, told the magazine.
Along with BAPCO, the Gulf Petrochemical Industries Company (GPIC) too is at the forefront of petrochemical and downstream initiatives in the country.
“Bahrain will look to bolster its downstream capacities over time as a means to diversify its economy. It remains unclear how long the oil downtrend will continue for, so moving downstream is a step in the right direction. Bahrain needs to look no further than Saudi Arabia, who had for years developed its downstream initiatives to great success,” Muhamad Fadhil, regional manager for ICIS MENA, said.
Senior analysts at global consultancy firm Wood Mackenzie also agreed, telling Oil & Gas Middle East in a statement: “The expansion on the downstream side is directly linked to lack of upstream production/reserves growth. The lack of investment in upstream ventures is linked to the lower prospectively of Bahrain's acreage. Therefore, it is not a strategic decision for Bahrain to diversify away from the upstream. The (production) prospect is low and the country's reserves continue to decline.”
“The refinery is actually quite a competitive asset and will be even more so once expanded. The Middle East will be a major exporter of oil products going forward and the expansion of Bahrain’s refinery will ensure that it can compete successfully with similar export orientated facilities elsewhere (SATORP, Yasref, Ruwais etc),” the Wood Mackenzie analysts stated.