Bahraini.TV

Bahrain is moving quickly to clear the way for energy exploration to begin on three blocks off the kingdom’s coast, with the Shura Council giving its approval to two tenders, which were ratified by the parliament in mid-January.

The council, the upper house of the National Assembly, on January 28 gave its approval to the tenders and awarded the contracts to US firm Occidental and Thailand’s PTT Exploration and Production to conduct exploratory work on the three blocks. In October 2007, Occidental won the bidding for two blocks, both in Bahrain’s south eastern coastal waters, beating out Russia’s state-owned oil operator Zarubezhneft, while the Thai company obtained the rights to work on a block to the north west.

The opening of the new fields is significant as it represents the first major oil exploration project in Bahrain for more than 70 years.

While three of the four blocks raised keen interest, with 18 companies seeking preliminary information and three submitting bids, there was no bid for the site to the north, though a new tender could be called in the future for the exploration rights for this block.

Parliament approved the tenders on January 16 by a unanimous vote, a step that Abdul-Hussain bin Ali Mirza, the minister of oil and gas affairs and head of the Tender Board that evaluated the bids, said was a major achievement for democracy in Bahrain.

“Exploration of oil is an important matter affecting our future generation,” Dr Mirza told the local press. “I therefore consider the day the tenders were approved by parliament as a historic day.”

Though Dr Mirza said in October he hoped the approval for the offshore exploration tenders would be given before the end of 2007, the additional scrutiny the bidding process was subjected to put back the projected deadline. However, such delays were to be expected considering that these tenders were the first to be directly awarded by the Tender Board for oil exploration and then submitted for full parliamentary approval.

The quick approval by the Shura Council is also indicative of Bahrain’s growing awareness of the limitations of existing reserves and the need to sustain its oil and gas industry for as long as possible. Having been the first Gulf state to export oil, back in the 1930s, Bahrain is now poised to become a net importer. Present production has dwindled to below 40,000 barrels per day (bpd). Through identifying new reserves and investing in technology to enhance extraction at existing ones, Bahrain hopes to double this figure.

This awareness was highlighted by Khalid Al Maskati, the chairman of the council’s Financial and Economic Affairs Committee, who said the deliberations had been conducted as quickly as possible.

“We were keen on speeding up both tenders, ensuring they didn’t get delayed, since they involve oil investments worth billions of dinars,” he said on January 28.

“Such tenders are being brought for the first time to the National Assembly and delaying them wouldn’t have been good. But the way we dealt with them shows we are ready for more in the future.”

Bahrain has also worked to ensure it will maximise the benefits from any new discoveries.

Under the terms of the tenders, Occidental and PTT have seven years to conduct exploration work, with geological and geophysical surveys to be carried out in the first year, followed by seismic surveys and drilling of wells over the following three years. The final three years will be devoted to more advanced exploration and development work.

One of the key conditions of the contracts is that, should Occidental and PTT fail to discover basins of commercially viable oil or gas, they will have to bear the full costs of the exploration work. If sufficient reserves are identified to warrant exploitation, a revenue sharing formula will come into effect, with the US firm to receive an 18% pre tax share and PTT 25%, according to local reports on January 16.

Bahrain has also opened a tender for exploration for an onshore block, with the government preparing to announce a short list of tendering companies from the eight bids submitted, possibly in early February.

The final step in the approval process for the offshore tenders is their ratification by Sheikh Hamad bin Isa Al Khalifa, king of Bahrain. With royal assent expected to be given soon, Bahrain’s drive to revitalise its ageing energy sector will shift up a gear.