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Advertisers Bank of Bahrain and Kuwait B.S.C.
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Bapco - Bahrain's oil industry keeping ahead of the times
Bahrain's oil industry began more than 70 years ago. Most people are surprised to learn that Bahrain was pumping oil years before Saudi Arabia began its own search for black gold.
The Standard Oil Company of California formed the Bahrain Petroleum Company (Bapco) in 1929. Bahrain's first well was spudded in October 1931, and oil was found in 1932 at Jebel Dukhan, or Smokey Mountain. "Well Number 1" -- now a tourist site in Bahrain -- produced 9,600 barrels a day.
In 1936, Bapco constructed a small 10,000 barrels per day refinery, and shipping and tank facilities were built. Before long, Bapco was expanding its refining operations and began working with Saudi Arabia, by bringing in some of its crude oil.
The seventies saw the Bahrain Government's gradual participation in the producing and local marketing operation of the Refinery, taking over 100% of these operations in 1979. The operating responsibility was placed with Banoco, which was formed in 1976.
A light isomate production plant was added to the refinery in 1983, and today liquefied petroleum gas (LPG), naphtha, gasoline, jet fuel, kerosene, diesel oils, fuel oils, and asphalts are produced.
In April 1997, the Government of Bahrain took over full ownership of the Bahrain Refinery, which created a new era of investment and modernization. Major oil and gas exploration programs were launched in 1981 and 1989 and are continuing today.
In July 1998, the Government of Bahrain announced a multimillion-dollar plan to modernize the 63-year-old Refinery.
According to Johann Lubbe, Chief Executive of the Bahrain Petroleum Company, the modernization plan comprises several strategies which include both the installation of new facilities and the upgrading of a number of existing units.
"What is new is the vast investment we are making to preserve our position for the future. The environmental issue has been a very important one in the oil industry for many years. We strive to minimize any impact to our environment by emissions to the air or discharges to water, or solid waste effluent.
"Environmental standards have changed over the years, generally through worldwide regulations. From the company's point of view, we like to believe that we're environmentally conscious, but we are also running a 60-year-old refinery. So what we embarked on re phase-wise improvements supported by improved operating standards. We can't improve everything overnight," explained Lubbe, who has headed the refinery for almost five years and has been in the oil refining industry for 37 years.
Bapco's long-term phased investment program has been designed to completely comply with environmental impact regulations.
He says several projects are currently underway as part of this major modernization plan - and will be completed over the next few years.
They include an In-Line Blending Project, which will improve the way a product is blended; the Low Sulphur Diesel production project, which will enable the Refinery to produce low-sulphur diesel of 0.05 weight percent, or lower, in line with the levels now required in most industrialized countries; the Un-Leaded Gasoline Project to be completed this year; the replacement of GCU compressors; and the construction of a new Kero Merox Plant for jet fuel treating.
Bapco and Banoco merger
In 1999, the government of Bahrain announced it would merge its two companies, Banoco and Bapco. The Supreme Oil Council announced the intent to merge the two companies into a single new entity to be called the Bahrain Petroleum Company.
" In the past, Banoco handled the exploration and production of crude oil and marketing of products, whereas Bapco handled refining, shipping and administration of general facilities.
"By making it one company, we can streamline and improve productivity and then optimize the value chain - from exploration, production supply to refining, marketing, etc., so that we can maximize the profit from the total operation," Lubbe said.
"This is a very competitive industry, we always need to stay on top of development," said Abdul Hussain Ali Mirza, Bapco's Deputy Chief Executive.
The oil industry is directed by the Supreme Oil Council, which is chaired by the Prime Minister. Decisions are executed by the Ministry of Oil and Industry and implemented through Bapco.
"From a strategic point of view, in the oil industry, decisions are difficult, because we deal with such vast amounts of money, but also because we can't change things overnight. It takes up to five years to improve or install a plant, so we must make long-term projections," said Lubbe.
"The Bahraini Government is our shareholder. We know from benchmarking analysis how we rate in competitiveness in terms of international markets. We have state-of-the-art practices.
"As other countries change to make products environmentally friendly, we will have to follow. And Bahrain also has its own set of environmental standards," explained Lubbe, who admits a tremendous appreciation of Bahrain's eco-tourism. "The variety of birds on this island is astonishing; we've spotted migratory birds here that we've often seen in Africa," he said.
Description of assets
The Bapco Refinery has 5 Crude Distillation Units. Upgrading Units comprise of Mild Hydrocracker, a Catalytic Reformer, Distillate Hydrotreater and Visbreaker. The Refinery configuration is geared for high middle distillate yield operation. The crude oil supply is still fed from the Bahrain field and Saudi Arabia by an under-sea pipeline. And Bapco's wharf has 7 berths and can accommodate ships up to 70,000 tons.
It is here that Bapco loads more than 700 ships annually. More than 95 percent of Bapco's production is currently exported to Asia, Japan, Africa and GCC states.
The Bapco Refinery manufactures a full range of fuel products as well as naphtha for petrochemical feedstock. The bulk of theproducts are exported after meeting the local product and Bahrainairport demands. Information Management and Communications in all areas of the company operations are handled through state of the art computer systems and electronic networks.
Stratey for the New Millenium strategic investment program
Bapco knows the value of modernizing the refinery to upgrade major products in line with environmentally driven specification.
It believes that by improving its environmental performance and efficiency, Bapco will become more competitive. This upgrade program began in 1998 and is due for completion in 2003; the renovation will cost $700 million, in addition to the $66 million in-line blending project, which is scheduled to be completed in mid 2000.
Bapco is also in the process of preparing itself to produce unleaded gasoline in mid-2000, which, when completed, will comprise an upgrade to the tune of $6.9 million. There is also a scheduled $21.5 replacement of GCU gas compressors in 2001, which will improve FCCU process efficiency and reduce maintenance costs.
"One year ago oil prices were the lowest they've been in a decade, now they're the highest they've been in a decade," said Lubbe.
"At present the refining industry is not very lucrative. As oil prices have changed, the refinery margins have often become negative due to the relatively lower product prices compared to crude oil. Product prices are influenced by supply and demand and inventory levels. The demand is influenced by economic growth and in the short term seasonal climatic factors.
"In short, the differential between product prices and crude price has not been maintained which has squeezed our gross margin", says Lubbe. "This is not a local problem but one which affects the refining industry as a whole." "Since the local product demand is relatively small compared to the refinery capacity, most of our production is exported."
"In 1999, Bapco had its highest annual crude run in history, achieved through upgrading our systems, constantly working to improve the reliability of our equipment, all which helps usoperate more efficiently."
Vision for the future
Lubbe says that Bapco has entered the new millennium as a new company incorporating the main upstream and downstream sectors of the oil industry in Bahrain.
The upstream area will focus on production and utilization of onshore oil and gas, while further developing the petroleum potential.
The refinery will continue to concentrate on safe and efficient operation, according to Lubbe, and will manufacture quality products in line with market specifications.
Bapco's marketing aims, meanwhile, are to enhance its existing position and explore niche areas for the maximum benefit of the integrated downstream operation to meet customer requirements.
"People don't care where petrol comes from, because we're making commodities they can buy anywhere, it's very competitive. Price is the bottom line. That's why the competition is so tough, and we have to strive to improve all the time," Lubbe said.
"So we have to reduce costs, increase yield, and improve our productivity. Because international prices affect everyone, we must do the best we can to remain in the market and be competitive," said Abdul Hussain Ali Mirza, who has 38 years ofexperience at Bapco.
Mirza stated that Bapco currently has 88% Bahraini employees, many of them occupying senior positions in the company. "In Bahrain and in the region Bapco is well-known for development of its Bahraini workforce: many senior officials and executives in the public and private sectors in Bahrain today - such as Ministers and chief executives of banks and industrial organizations - have beentrained and developed by Bapco over the last many years."
Bahraini and international contractors will have a lot of work –here in the next five years. There are important developments here regarding low sulfur diesel," said Bapco's Lubbe.
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Table of Contents The Al Khalifa Dynasty - Ruling Bahrain Since 1783 |
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In 1945 an underground pipeline was laid from Damman, Saudi Arabia to Sitra, Bahrain, 54 km away. At the time, it was the longest commercial underwater pipeline in the world.
The objective was to enable the Refinery to upgrade its main products with more environmentally friendly specifications, and to improve the production efficiency, which would ensure Bapco would remain competitive into the new millennium.
"Any of our plants that are not environmentally friendly, we are replacing - such as a jet fuel plant - at $ 30 million," said Lubbe.
"The government has decided to consolidate the oil industry in Bahrain and to merge the upstream and downstream sectors, thus it will merge Banoco and Bapco. This provides an opportunity to improve efficiencies and benefit from the economies through integration of services," said Lubbe.