Dubbed as the F1 for the oil and gas industry in the Middle East, the 20th Middle East Petroleum and Gas Conference 2012 (MEPGC) kicked off in Manama on Monday at the Ritz Carlton Hotel and Spa.
Addressing the over 300 delegates Dr. Abdul Hussain bin Ali Mirza Minister of Energy said that the success of the MEPGC 2012 was a solid testimonial of the confidence the region and the world have in Bahrain.
“The conference takes place during a stimulating time in our nation’s history, during the period of rebuilding after the fateful events that took place about a year ago. This was demonstrated resoundingly last week during the Formula 1 race that proved to be a great success. Your presence here this week at this event, which could be likened to be the
It is noteworthy to mention that next month; on the 1st of June we will celebrate 80 years since the discovery of oil in the GCC at Jebel Ad Dukhan. If time permits I would recommend you to visit the birthplace of oil in the region that has become the key holder of the world’s energy resources and the main supplier of the world’s ever growing energy needs,” the Minister said.
This particular conference is the 20th annual conference in this series that takes place in the region and it is the 5th time that it takes place in Bahrain. The dynamo of this conference, Dr. Fereidun Fesharaki is a well-known figure in the international oil industry and has been closely associated with Bahrain for many years. Most recently Fereidun has been appointed by the current US Secretary of Energy as a member of the US National Petroleum Council which is the advisory body to the Secretary of Energy.
At first, the theme of this conference sounded intriguing to me:” The Known Unknowns and the Unknown Unknowns”. Upon deeper thinking however I realized that indeed, the world we live in, especially over the last five years has introduced several unknowns for the world in general, and for our industry in particular. The proverbial “good old days” with steady demand growth, and with steady and relatively low oil prices, are gone, perhaps forever. The new norms for our industry are volatility, high oil prices and increased pressures due to environmental and global warming considerations. The impact our industry has on the world’s economies is the subject of many debates or discussion in just about every conference, and justifiably so. In a world that has become greatly integrated, interdependence becomes a key driving force.
Let me address briefly the issue of price volatility as it applies to our industry. While it is short-term price volatility that receives the attention of Platts, Reuters, and Bloomberg, for our industry the long-term price of oil is what is more important. Our industry is highly capital intensive, having long lead times for infrastructure development and usually with even longer payback periods. Investors are looking for a secure return on their investment and thus stability of demand is important. The global economic downturn is by no means over. Just recently it was announced that the UK is back in recession. The rest of Europe is still on precarious ground due to the unfolding debt crisis and the newly introduced austerity measures. The USA is showing some signs of recovery, but to counterbalance this we witnessed a slowing down in the world’s economics engines China and India. The pessimistic outlook, engendered by a lack of confidence on the demand side invariably leads to reluctance by investors to put in money into an uncertain investment. However this practice is shortsighted, since we feel that if investments are not made in a timely and adequate manner, then future consumer needs might not be met. We in Bahrain have recognized this and have taken steps to invest.
2010 saw the birth of Tatweer Petroleum, a joint venture between Nogaholding, Occidental Petroleum (OXY) of the United States and Mubadala Development Corporation of the UAE whose objectives are to revitalize the aging onshore Bahrain fields. This initiative will treble the indigenous crude production and will double the domestic gas production to 2.7 billion cubic feet a day by 2024. These undertakings will require significant investment and it is expected that over the next two decades some $15 billion will be invested to develop our national resources.
Let me briefly turn my attention to our recent activities on the downstream side.
The Bapco refinery is old by world standards, some units being over 75 years old. The refinery evolved over the years and new units have been added, the last two being the hydrocracker and the lube base oil plants in 2007 and 2010 respectively. We now have a new refinery master plan for upgrading the refinery. The investment, depending on final capacity and configuration is currently estimated to be in the region of 6 – 8 billion dollars. The new upgrade will increase the capacity of the refinery from 260 bpcd to over 400 mbpcd, and will be able to meet the quality of the products demanded by the markets of the future, will meet the environmental standards, and will be designed to world class energy efficiency standards.
The agenda of the conference also includes a section devoted to a topic that is central and timely to our region in general, and to Bahrain in particular – and that is the availability of gas. Despite of the fact that the region is endowed with abundant resources, with the exception of Qatar we all find ourselves short of gas. We are undertaking several initiatives on several fronts to secure the gas that is vital for the economic growth of our Kingdom and you will hear about this during the proceedings of the conference. During the very recent past we witnessed rapid changes in the industry most notably resulting from the Fukushima nuclear disaster and the ensuing Japanese nuclear outage. Add to this the recession in Europe as well as the announced European nuclear generation phase-out, and the supply demand picture becomes even more uncertain. The developments in the US regarding shale gas and planned liquefaction capability further adds to the uncertainties. Yet once again, as in the case of upstream, indecision is not an option and we have made plans to build LNG import facilities needed to supplement our indigenous gas.
So far we have addressed what are commonly referred to as conventional sources! With a vision towards the future, we in Bahrain have also taken steps to complement our energy supply by implementing two pilot projects in the renewable area, namely 2 plants generating 5 Megawatts each, based on wind and solar technologies. Once the trials with the pilot plants will be successful we expect that this form of complementary power generation will become a mainstay on the Bahrain generation landscape.