INTERVIEW: Bahrain eyes potential trading unit for refined products

Bahrain, one of the Persian Gulf region's smallest crude producers, is considering setting up a trading unit for the fuel and other products produced at its soon-to-be expanded refinery in Sitra, the chief executive of the country's energy development arm told S&P Global Commodity Insights.

Bahrain is expanding capacity at the refinery from 270,000-280,000 b/d currently to up to 400,000 b/d by 2024, and with the country also planning to import LNG in the future to meet peak electricity demand, a trading company could have an important role to play.

"You put all that together and it would seem to make sense that we should have a trading capability," Mark Thomas, CEO of Nogaholdings, said in an interview.

Bahrain's current oil sales are conducted through what he said was a "quite simple trading mechanism" by national oil company Bapco, with the majority of products sold on a FOB basis.

Any plans to establish a trading unit would only be aimed at adding "a little value" to products rather than taking on regional peers, he added.

Saudi Arabia's state-run Aramco has a trading arm with aggressive expansion plans, as does Abu Dhabi National Oil Co., with both companies seeking to take advantage of growing oil demand from Asia.

Bahrain, which has traditionally sold into India, Pakistan and Asia Pacific, is also seeing opportunities to enter the European market, particularly in diesel, Thomas said.

Downstream plans

The country is expanding capacity at Bapco's Sitra refinery as part of its $7 billion modernization program, and following the upgrade it will be geared to process lower quality high-sulfur crudes.

Bahrain's former oil minister Sheikh Mohammed bin Khalifa, who was replaced in a cabinet reshuffle earlier this month, said on May 16 the modernization program was currently 80-85% complete.

The project, which has suffered delays due to labor shortages stemming from the pandemic, is expected to reach mechanical completion in 2023, though full operations are not likely to be achieved until the following year, Thomas said.

"It can be a six to 12 month process from the time we start introducing crude into the new facility to the time we actually say we're running it as a as a single refinery, at the nameplate capacity and so on," Thomas said. "So it'll be well into 2024 before we get the whole facility kind of up running, performance-tested and running in a stable mode."

Future plans could include a petrochemical project that would use naphtha as feedstock, though that would depend on how the refinery modernization progresses, Thomas said.

Bapco has completed marketing and technical studies and talks are underway with technology providers and financiers, Thomas said. The chemicals project will have "sufficient" naphtha feedstock and would likely be "world-scale" and competitive with other units in the region, he said.

Going green

Bahrain has followed the lead of Saudi Arabia and the UAE in pledging to reach net-zero emissions in the coming decades. The country is targeting a 2060 timeline, which includes plans to lower greenhouse gas emissions by 30% by 2035.

Nogaholding has been given a mandate to help lower the country's emissions through carbon capture utilization and storage, and a memorandum of understanding was signed with Italian company Eni on June 21 to jointly develop a CCUS facility.

No real details of the project have emerged yet, but Bahrain is planning for it to be large-scale. Thomas said that the CCUS facility could remove 10-12 million mt/year of carbon dioxide from Bahrain's total emissions.

He compared the target to the UK's much-hyped Teesside project, which aims to be the world's first commercial scale gas-fired power station with CCUS, with an initial target of capturing 4 million mt/year of CO2.

"So what we would be looking at would be double that size," Thomas said.

The country also plans to import renewable electricity from the interconnected Gulf Cooperation Council grid as way to supplement its generation capacity through cleaner energy.