The Kingdom of Bahrain which was the first nation in the GCC to drill the oil in 1932 has achieved many strides in the development of the oil and gas sector in the past eight decades and now plans $8billion refinery.
In his opening remarks Dr. Abdul Hussain bin Ali Mirza, Minister of Energy at the Middle East Base Oils and Lubes Conference on Wednesday highlighted the latest venture Bahrain Lube Oil Company.
When it comes to lube oil, neither, NOGA or Bapco possess the technical know-how in this area nor did it have the marketing capability for a specialized product, and we sought third party assistance. The search led us to a strategic partner – Neste Oil of Finland – and the Bahrain Lube Oil Company or BLOC was born in 2009. You will hear more details on the project later in the conference from speakers representing Bapco and Neste Oil.
The second initiative in the area involves the introduction of a Bahrain branded lube oil into the local market. This initiative was launched about three years ago when it was recognized that Bapco’s presence in the local market will improve the corporate profitability as well as enhance Bapco’s image in the market in line with the company’s corporate logo of “striving for excellence”. A study by a third party consultant confirmed the desirability of such a business and a new department dedicated to this initiative was formed and are busy putting the wheels in motion. The project has a long term synergy opportunity with the base oil plant, through forming an integrated business unit with the vision to become a major player in Middle East.
These two initiatives reflect a renewed effort in Bahrain towards capturing value for the stakeholders and for maximizing returns on the investments made to bring the aging refinery to the modern era. More such investments are in the pipeline the most noted being the $6 to 8billion Refinery Master Plan.
In the current economic climate, with a limited availability of financial resources, it is incumbent that both technical and marketing risks are minimized or preferably totally eliminated. One way this can be accomplished is by the formation of strategic alliances where the partners leverage on each other’s strengths. In the case of the Base Oil Plant – The Finish Company Neste Oil provide their technical expertise from the Neste Jacobs group, the operational expertise from the Porvoo Refinery in Finland, and their marketing expertise from their worldwide operations. Bahrain in turn provides its highly competent world class workforce, the land located close to the refinery and export facilities and a superior feedstock. In other words a win win situation.
When we first contemplated the Joint Venture we were apprehensive that the cultural differences between the partners could lead to potential problems. I am proud to report that the project was completed by personnel representing 12 different nationalities and speaking 20 different languages. Moreover the project was completed on budget and on time, accumulating over 10 million man-hours without a lost time accident. This is indeed a great accomplishment considering that at the height of construction over 2,700 people were on site. We all worked together towards a common goal. This model could be possibly considered as a case study in international cooperation.
One other point that I observed while the project was going on was the constant search for innovation. The lube base oil plant represented a new concept for Bahrain – we were introducing a brand new product into our portfolio. For this we took steps to acquire the competencies needed for the future by training a new cadre of engineers and technicians. By building this plant Bahrain combined its vision of the future, with the current market situation, while relying on the experiences and lessons of the past. This combination is bound to produce good results and we already experience this in the market.
Lubricants being a sister of the traditional fuels industry, more specifically of the transportations fuel sector, the fate of the two, follow parallel paths. Both are equally affected by the currently ongoing economic crisis. Alongside demand destruction in the mature economies, the world experienced a reduction of growth in the emerging economies for both diesel and lubricants. We expect that with the economic recovery, whether it is next year or later, the market will return to 2010 levels and by 2016 reaching 49.6 million tons. The demand for Group III base oils is expected to nearly double from 7% of the total lube market in 2010 to 13% of the market by 2016. This bodes well to our plant in Bahrain.
Another parallel that can be observed in the two markets is the geographical distribution of the growth markets. China, India and the Middle East are continuing on the path of economic booms and it is expected that prosperity in these nations will add millions of vehicles to their highways. Just as in the case of transportation fuels, the demand for lubes will be driven primarily by Asia.
In response to tightening environmental with Euro V or VI emission norms of requiring low CO2 emissions levels, means that new engine technologies will require a new generation of lubricating oils. This is one of the challenges that facing the industry today and we must position ourselves from now to address this challenge.
I want to thank and wish the organizers, speakers, moderators and delegates the best during the coming two days. I understand that the program includes a visit to the newest addition to the international lube manufacturing facilities – the Bahrain Lube Base Oil Company. I recommend that you take advantage of this opportunity to see the fruits of international cooperation at work in the form of the state-of-the art facility.