Bahrain’s proven oil reserves stood at 125 million barrels as of January 2008, all of which are located in the Awali field. In addition to what is produced in its territory, Bahrain and Saudi Arabia share the 300,000 barrels per day (bbl/d) of oil production from the offshore Abu Saafa field. This figure is counted in Saudi oil production figures, but half of the output is given to Bahrain. Separately, Bahrain also purchases Arab Light crude oil from Saudi Arabia via a subsea pipeline, which it refines for export at its Sitra refinery (see the Saudi Arabia Country Analysis Brief for more information).

In 2007, Bahrain produced an estimated 49,000 bbl/d of total oil liquids, of which 35,000 bbl/d was crude oil, 11,000 bbl/d was natural gas liquids, and 3,000 bbl/d was refinery gain. This amount excludes joint production from the Abu Saafa field, of which Bahrain’s share is about 150,000 bbl/d. During 2007, Bahrain consumed an estimated 35,000 bbl/d of oil.

Unlike other Gulf states, Bahrain exports refined petroleum products rather than crude oil. Bahrain’s domestic oil pipeline network is rather limited, focused primarily on delivering crude oil from the Awali field to the refinery at Sitra. Because domestic production is much lower than the country’s refining capacity, Bahrain imports about 225,000 bbl/d of Arab Light crude oil from Saudi Arabia via a subsea pipeline linking the two countries. Bahrain Petroleum Company (Bapco) refines this crude oil and exports much of it via tanker. Most of Bahrain’s exports go to India and other Asian markets. Joint Bahrain-Saudi Arabian crude oil production from the offshore Abu Saafa field is sold from the Ras Tanura terminal in Saudi Arabia, the world’s largest export terminal.

Bahrain’s oil sector is dominated by state-owned Bahrain Petroleum Company (Bapco), which is charged with the exploration, production, refining, marketing, and distribution of Bahraini oil for domestic use and the international market. In 2005, Bahrain’s government issued a royal decree establishing the National Oil and Gas Authority (NOGA), which replaced the Ministry of Oil. NOGA is the primary body with regulatory and oversight authority as well as policymaking functions for the oil sector. Dr. Abd al-Husayn Mirza was appointed as the Chairman of NOGA. Dr. Mirza also holds the title of Minister of Oil & Gas Affairs, and holds the rank of a cabinet minister since December 2006. In August 2007, a NOGA holding company was established to administer the government’s 100% stake in Bapco; its 75% of Banagas; its 60% stake in Bafco, the aviation fuel company and its one-third share of Gulf Petrochemical Industries Company. The holding company will invest in the domestic oil and gas industry, establish new companies and also invest in energy companies abroad. It is under the supervision of NOGA and its head, Abd al- Husayn Mirza.

Bahrain is one of the oldest oil-producing countries in the Persian Gulf. Current crude oil production of about 35,000 bbl/d from the Awali field is well below peak production of 75,000 bbl/d in the 1970s. To help offset continuing declines in oil output, Bapco announced that it expects to drill 700 new wells at the Awali field between 2007 and 2015. Company officials have said that they expect the drilling program to increase the field’s production capacity by 12,000 bbl/d, which is only likely to offset anticipated declines. In November, 2007, Bapco received 8 bids from international oil companies for a project to upgrade operations in the Awali field. Bahrain has since compiled a short list of 3 international oil companies as potential partners for this onshore oil field project. ExxonMobil, Occidental Petroleum and Denmark’s Maersk Oil are on the shortlist, and a final decision over the winning bidder is expected by June 2008. Bahrain’s oil minister said the country would add another 700 oil wells over the next 15 years to maintain and increase oil production.

To encourage greater foreign investment in Bahrain’s upstream oil sector, in March 2007 NOGA announced that it had opened a new licensing round for four offshore exploration and production (E&P) projects. Until 2001, much of the offshore territory in the Gulf of Bahrain was unavailable for E&P work as a result of a maritime boundary dispute with Qatar, which was resolved by the International Court of Justice (see the Qatar Country Analysis Brief for more information). The result of subsequent prospecting in Bahrain’s eastern and south-eastern territorial waters after the dispute with Qatar had been resolved was disappointing. In February, 2008, Thailand’s PTTEP and U.S. Occidental were awarded exploration and production licenses offshore Bahrain. PTTEP signed the exploration and production-sharing agreement (EPSA) for Block 2, where it committed to drilling at least 2 wells in the Khuff formation. Occidental signed an EPSA for Blocks 3 and 4, where it committed to drilling 3 wells in the Arab formation. Both companies also committed to perform seismic surveying of their areas during their 6-year exploration periods. In case of a commercial discovery, the exploration period will be converted to a 24-year production period.

Bahrain has 250,000 bbl/d of refining capacity at the Bapco-owned Sitra facility. However, NOGA figures show that in 2006 the Sitra plant ran at an average rate of 263,000 bbl/d, slightly higher than its nameplate capacity. Plans for the expansion of the 250,000 bbl/d Bahrain refineryinclude laying new pipelines to import crude from SaudiArabia. About one-sixth of the crude used by the refinery originates from the Bahrain oilfield and the rest ispumped from Saudi Arabia via a 33-mile pipeline. Earlier in 2007, Bahrain Petroleum Company (Bapco) and Saudi Aramco conducted a joint study into the long proposed project to build a new pipeline to transport Saudi crude oil to the refinery. Reportedly, this aging pipeline will be decommissioned after the construction of the “New Arabia” pipeline, a 71-mile, 350,000-450,000-bbl/d capacity feed running between Saudi Arabia’s Abqaiq oil processing center and Bahrain’s refinery at Sitra. The pipeline will be built by local contractors, and is expected to come online in 2008. In 2006, Bahrain imported 224,000 bbl/d of Saudi crude via the existing pipeline

Bapco's refinery modernization includes a $685 million project to reduce the sulphur content of its diesel and kerosene. In 2005, Foster Wheeler Italiana, an Italian subsidiary of the US-based Foster Wheeler Corporation, was awarded the $112 million contract for a refinery gas desulphurization project. On December 4, 2007, the Low Sulphur Diesel Production (LSDP) facility at Bapco’s refinery was inaugurated. This project reduces the current high-sulphur content in Bapco’s diesel pool, ensuring sales in the international diesel market. It will produce 60,000 barrels per day and is in line with the government’s aim of keeping abreast of the latest technological advancements in the sector. The government of Bahrain has studied the possibility of building a petrochemical complex alongside the Sitra refinery, but no final decision has been reached on whether or not to proceed with such a project.