How advanced is the development of the newly-announced oil and gas finds?
SHEIKH MOHAMMED BIN KHALIFA BIN AHMED AL KHALIFA: In April 2018 we announced two major new discoveries. The first is an offshore shale formation with an estimated 81.5bn barrels of tight oil, our biggest oil discovery since 1932. To put this amount into context, we have extracted around 2bn barrels in the last 88 years of oil production in Bahrain. This new find is currently undergoing commercial evaluation for its viability. In making the discovery we drilled into a tight formation in a marine environment, albeit a shallow one, for the first time ever, and we also drilled the first multi-thousand-foot horizontal well in a marine environment, at a length of 2400 feet.
The second discovery is a find of 10trn-20trn cu feet of natural gas. This is considered a deep gas find because it is under the Khuff and Unayzah fields, but it is only at 13,000 feet, which is much less than what is normally considered deep. Technical discovery on this find is complete but we are still in the final stages of the de-risking process, confirming the drilling plan and design, performing fracture simulations and other final tests, finalising the full field development plan, and appraising the potential recovery. There are two zones in this field, one being tight clastic sediment and the other non-consolidated sand, so each zone will need its own development strategy. We expect to begin production on this field in 2019.
What kind of investment will be needed to begin the commercial production of these resources?
SHEIKH MOHAMMED: This is the first development of an offshore shale field, so it will certainly require a sizeable investment. It is helpful that the marine environment in question is very shallow, so we may be able to do some minor reclamation and make an onshore platform from which we can drill. The oil is high-quality light oil and there is a large amount of it, making its development highly attractive. The question we are studying now is how much it will cost to produce per barrel. In the US shale development has made major efficiency gains. We are currently speaking with companies from the US who have become the experts in this segment, to see what kind of partnerships we can form to best develop this resource for Bahrain. We have also launched a $1bn energy fund to support our investment plans, ranging from upstream development of the new field to the downstream expansion of the Bahrain Petroleum Company and other infrastructural needs.
Do fluctuating oil prices affect your capacity to make the necessary investments?
SHEIKH MOHAMMED: The price of oil is important to Bahrain, and a higher oil price would certainly make it easier for us to raise debt and attract investment. Even at the lowest point, when oil was $27 a barrel, we continued our production at Tatweer and maintained a steady production rate, which means making constant investments. Although we cannot predict future oil prices, it is important to note that speculators are concentrating on looking at the demand side of the equation, where we do see a slowdown due to trade issues and alternative sources of electricity becoming more economical. That said, we need to keep in mind that oil production requires long-term investment and stockpile levels are below average due to the severe cut-off in global investment caused by the price drop.
In what ways does the new discovery affect Bahrain’s natural gas strategy?
SHEIKH MOHAMMED: Bahrain has commissioned a new liquefied natural gas (LNG) terminal for imports. The new oil discovery also contains associated gas, and we have just completed the Banagas expansion project, which nearly doubles its capacity to process associated gas. The new discovery is a welcome development that will help us accomplish the goal of diversifying our resources, and give us more energy stability.
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