Interview: Abdul Hussain bin Ali Mirza

What are the expectations for the onshore and offshore explorations that are currently under way?

ABDUL HUSSAIN BIN ALI MIRZA: The exploration and development of hydrocarbons fields is slow, deliberate and sustained. Tatweer Petroleum commenced onshore operations in December 2009 with the goal of doubling crude oil production within five years. When they began, onshore crude oil production was just over 30,000 barrels per day (bpd). After two years production is now over 45,000 bpd, which is ahead of the initial goal. Over the next 5-10 years, crude oil production will increase to some 100,000 bpd. Deep gas activity is onshore and exploration activities will commence in 2012. The prospects are also promising for non-conventional gas reserves.

Offshore exploration for both oil and gas is also proceeding according to plans. Seismic and geological studies have been the focus of activity in 2011. We plan to drill a well in block one in February 2012, in block two in the second quarter of 2012 and in blocks three and four in late 2012. There are also plans to drill an exploration well in block four in December 2011 .

How will the master plan to upgrade the BAPCO refinery increase its capacity?

MIRZA: The aim of the master plan is to make the refinery competitive with the larger, more complex refineries worldwide, and to insulate it from the economic downside of business cycles. This aim is not achieved by increasing the crude oil processing capacity alone. Constructing process units, which convert low value products into high value ones, can increase the worth of the product mix manufactured by the refinery.

BAPCO exports about 90% of its production, with prices set by the global market. BAPCO’s volume of products is small compared to this market, so with export products, BAPCO follows rather than sets prices. For example, the global oil market price for fuel oil is less than the crude oil price. Value can thus be created by converting fuel oil into the valuable products of diesel, jet fuel, gasoline and liquefied petroleum gas.

The upgrade to the BAPCO refinery will focus on reducing the fuel oil yield and increasing the yield of products that sell at a price higher than crude oil. The crude distillation units at the Bahrain refinery are old and we intend to replace five of them with two state-of-the-art crude distillation units.

To gain economies of scale, the refinery’s crude oil processing capacity will be increased from its current 260m barrels per calendar day (bpcd) to 450m bpcd. The total costs are expected to be around $5bn. The refinery upgrade will also include further environmental protection investments that will reduce emissions and improve energy performance.

What other upgrades are being pursued for the Kingdom’s existing oil and gas infrastructure?

MIRZA: Activity in the upstream area has resulted in a significant increase in crude oil production and we have met the demand for natural gas. In the downstream area the environmental investments in the refinery to make ultra-low sulphur diesel and reduce sulphur oxide emissions have been very successful. We are also building a new wastewater treatment plant.

But plans are not limited to the oil sector. The Gulf Petrochemical Industries Company (GPIC) manufactures fertilisers that are used around the globe. The world population has just reached 7bn and the demand for food will continue to grow. To meet the increasing demand for fertiliser we plan to double the production capacity of ammonia and urea at the GPIC plant. Feasibility studies have been completed and the project will require an investment of over $1.5bn and will be coordinated with the supply of natural gas.

We also have initiatives to increase the Khuff gas production and capture the additional gas associated with our increased crude oil production, as well as develop a pre-Khuff reservoir. These initiatives are in addition to our plan to diversify and provide a stable gas supply by constructing a terminal to import liquefied natural gas. The early phases of this project have already begun.