INTERVIEW: Bahrain in talks with IOCs to develop new oil find in second half of decade

Bahrain is in talks with international oil companies to help develop the Khalij al-Bahrain oil find, a project that is expected to start in the second half of this decade due to the complexity of the structure and the need for technology and financing, an official told S&P Global Platts Nov. 30.

The island country in the Persian Gulf made waves in 2018 when it first revealed the extensive Khalij al-Bahrain reservoir off its west coast, which it said could contain some 80 billion barrels of tight oil -- its largest oil discovery since the 1930s. State-owned energy company Nogaholding has drilled two wells in the field and is currently evaluating the geoseismic data, its CEO Mark Thomas said in an interview.

"We brought in a couple of IOCs to give us their evaluation," said Thomas.

"The size of investment we require to develop an unconventional field offshore will be tremendous: you basically take the Permian and put it in water."

The company is open to all forms of agreements with IOCs, including a potential structure around an exploration and production contract with sharing on profit and oil.

"We are flexible on terms and we are flexible on structure and all we know it's a tremendous amount of capital to come and develop this. It will have to be a long-term partnership," he said.

"With the energy transition that is going on today, we recognize that to attract IOCs to come in we have to have a very attractive offer. That's part of our discussions right now with IOCs."

US oil company

Bahrain, the smallest oil producer in the six-member Gulf Cooperation Council, is hoping to attract IOCs as it seeks to implement its pledge to get to net-zero carbon emissions by 2060, in line with neighboring Saudi Arabia's timeline. Bahrain gets the majority of its oil, or about 150,000 b/d, from the offshore Abu Safah field it jointly owns with Saudi Arabia. Bahrain also produces more than 40,000 b/d from its onshore Bahrain field.

"Being net-zero does not mean that the IOCs are stopping exploration necessarily," Thomas said. "They are very selective about where they put their money. They want to invest in locations that are environmentally responsible, that have a program towards net-zero."

Nogaholding is aspiring to get an agreement with an IOC in place in 2022 to start working on a development program that would include more seismic work and more drilling.

"We are probably ... be in the second half of this decade before any material development starts to happen offshore," Thomas said.

Nogaholding is interested in talking to all IOCs, but is attracted to US oil companies due to their experience in the Permian basin.

LNG FSU

The company is also boosting exploration activity, particularly for gas, which has allowed it to postpone importing LNG for now despite investing in a gasification facility and a floating storage unit, which it has sub-chartered to get some revenue.

"We do not see that we will have a need necessarily to import LNG for quite a period of time," said Thomas. "We will continue to look for additional gas resources and develop it."

Eni, which has an E&P contract with Nogaholding for offshore Block 1, has also drilled in the field and it is evaluating data that has been received to move to phase two with additional drilling.

Bahrain has three other offshore blocks that are open to direct negotiations with investors, Thomas said.

Asset sales

Nogaholding is considering selling "non-strategic" oil and gas assets, such as pipelines, to investors as it follows in the footsteps of Abu Dhabi National Oil Co. and Saudi Aramco in monetizing its facilities.

ADNOC was the first company in the Persian Gulf to attract international investors to its assets in 2019, when it sold a stake in its oil pipelines, a model that was imitated by Aramco in 2021.

"We like the ADNOC model," said Thomas. "Our scope would initially look at things like pipelines and so on: assets that have a long life in front of them, [and] that have a continuous throughput that you could easily assign a commercial transaction to. Those are the types of quick wins we would look at."

Bahrain is seeking to develop its oil and gas assets while at the same time implementing its 2060 net-zero pledge. In that vein, Nogaholding is planning to reduce its carbon footprint, Thomas said.

"We have several projects underway to reduce the carbon intensity: a combination of lowering flaring, detecting and then mitigating methane emissions and installing solar to run some of our equipment," he said.

"We recognize that hydrocarbons in Bahrain won't last forever and therefore we need to look at alternative energy sources."