Bahrain secures energy needs

Thanks to efforts by international oil companies, the threat of Bahrain Field, the country's sole onshore source, drying up has been addressed for now. An alliance of Occidental Petroleum Corporation and Mubadala Development Company (Mubadala) has signed a 20-year Development and Production Sharing Agreement designed to expand oil and gas output from the field.

The agreement is essential as the field is relatively old with production beginning way back to 1932. The output has declined over the years. In 2008, its production level stood at 33,000 barrels per day, down by five per cent.

These companies aim to double the field's output by 2014 and reach a peak level of 100,000 barrels per day from 2016 onwards. Bahrain Field achieved its highest output level of 75,000 barrels per day in the 1970s.

The deal also calls for increasing gas production from the current level of 1.7 billion cubic feet per day to over 2.5 billion cubic feet per day in a span of five years. This move partly explains Bahraindragging its feet on reaching a deal to import gas from one of the neighbouring countries.

Earlier in the year, Manama decided to cease negotiations to import gas from Tehran in protest against comments by Iranian officials concerning the sovereignty of Bahrain. However, it seems Bahrain authorities have used the case as a tactic to overcome possible obligations or in the very least secure a more attractive deal.

At one point, Bahrain explored the idea of importing gas from Qatar, but no progress was made. Qatar is the world's largest exporter of liquefied natural gas (LNG). Its output stands at some 38 million tonnes of LNG annually, which is expected to reach 77 million tonnes a year by 2012.

Qatar's clients include companies in Japan, South Korea, India, Spain, the UK and the US.

To be sure, the Bahrain deal has its drawbacks, primarily concerning foreign ownership of scarce and strategic resources.

As partners, Occidental and Mubadala hold 48 per cent and 32 per cent of the new project respectively with Bahrain's National and Gas Authority owning 20 per cent. The deal envisages oil output above 33,000 barrels per day and gas production of 1.7 billion cubic feet per day.

However, Bahrain cannot be blamed for making such a move as major international oil companies with their know-how and technology have the capacity to shore up oil and gas levels and make discoveries that are commercially viable.

Also, the authorities should find comfort from Occidental's achievements in the development of oil fields in other Gulf Cooperation Council (GCC) countries.

Occidental is partly responsible for doubling Qatar's production level between 1998 and 2008 to nearly 1.4 million barrels per day. The company contributed to enhancing Qatar's proven oil reserves from 12.5 billion barrels in 1998 to 27.3 billion barrels in 2008.

Still, an alliance led by Occidental and includes Mubadala is credited with enhancing Oman's oil output levels in the past few years. The 2005 deal calls for increasing output from Oman's Mukhaizna oil field from 10,000 barrels per day to 150,000 barrels per day by investing some $2 billion in a span of five years.

At the time of winning the deal, Occidental and its partners indicated interest in investing some $2 billion in order to raise Mukhaizna's production to 150,000 bpd in a span of five years. Oman's oil output was reportedly 807,000 barrels per day in June, up from 803,000 bpd in May and 784,000 bpd in April, thanks to rising output from Mukhaizna.

- The writer is a Member of Parliament in Bahrain.