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Growing Bahrain

The island Kingdom has turned to PPP's to power growth.

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Desalinated Water Output, in million gallons.
Desalinated Water Output, in million gallons.
Bahrain hopes to increase production from its ageing oilfields by more than 100% by 2020.
Bahrain hopes to increase production from its ageing oilfields by more than 100% by 2020.

The island Kingdom has turned to public private partnerships to power its economic expansion.

Bahrain is in need of new sources of power as well as upgraded and new power networks as it strives to meet the demands placed on by a growing economy and expanding population. This was made abundantly clear in July, when energy consumption reached a record 2,650MW, according to the Bahrain Tribune, as temperatures soared beyond 40 degrees Celsius.

Bahrain had 2.3 gigawatts (GW) of installed electricity generation capacity in 2007, according to estimates by Business Monitor International (BMI), all of which coming from conventional thermal sources.

An estimated 9.2 billion kilowatthours (KWh) of electricity was generated in 2006, an increase from 8.2 billion in 2005. There are currently no exports of electricity and no imports.

Bahrain is now connected to the GCC Interconnection Grid, however, which will enable it to tap electricity from other countries, as well as participating in a future regional energy market.

The Ministry of Electricity and Water (MEW) anticipates annual growth in electricity consumption of seven percent each year for the next decade or so.

The authorities are encouraging independent power plants (IPPs) to operate and they have also privatised some state power assets.

Bahrain is one of the few countries in the Middle East that has laid the regulatory framework for the privatisation of the power generation industry, say experts.

The private sector has already contributed to the electricity and water sector in Bahrain through the construction of Bahrain’s first IPPs, Al Ezzel, and the enlargement of Al Hidd power and water station.

When fully operational in 2011, the Al Dur independent power and water project (IWPP) will be the Kingdom’s largest electricity and desalination plant and will be operated on a built, own and operate (BOO) basis by GDF Suez and the Gulf Investment Authority.

According to media reports, Bahrain was seeking a US$1.3 billion infrastructure loan to finance power and water projects in 2009. Of this total, $850 million will be allocated to add energy projects to the national grid between 2009 and 2014.

Under the plans, Bahrain is looking to build 10 new power stations and expand four others, as well as adding 380 kilometres in underground cables. The remaining funding will be used to upgrade Bahrain’s water network.
 

Water

Bahrain makes much use of desalinated water and major investments are planned to increase production from the current 143 million gallons per day, to 200 million gallons per day in 2011. New transmission systems and storage facilities will also be built.

In the waste water sector, production will reach 164,250 cubic meters annually by 2015, up slightly from the current 163,000 cubic meter annual capacity, according to data supplied by Aquastat, a division of the UN’s Food and Agricultural Organisation.

Because of Bahrain’s size, the challenges it is facing in its water sector are easier to respond to than in larger neighbouring states, such as Saudi Arabia.

According to Aquastat, total water withdrawals per capita increased by 14 percent between 2002 and 2007, equal to the rate of growth of the population over the same period. As the population remains small, with less than a million people, a well planned investment strategy in the water sector can cater for the country’s needs relatively easily.
 

According to IMF data, the population will reach 920,000 in 2012, up from 830,000 today. It should be noted that the industrial sector has increased its share of water consumed in the country, chipping away at agriculture’s share.

As economic growth rises, the industrial sector demand is also anticipated to rise. In 2008, Bahrain’s Electricity and Water Authority signed a Memorandum of Understanding (MoU) with Singapore’s National Water Agency (PUB).

The two agencies will collaborate on the operation and maintenance of water supply, and the design and construction of waste water treatment systems.

This partnership will create opportunities for Singapore’s own water companies, such as Hyflux and Darco, to enter Bahrain’s water sector.

Bahrain’s power house – The Al Dur IWPP

Once fully operational, the Al Dur independent water and power project will be Bahrain’s single biggest source of electricity and desalinated water. Located on the kingdom’s southeastern coast, the plant will have a capacity of 1,245MW and 191 million imperial gallons per day (MIGD) by June 2011.

According to media reports, the plant began commercial operations in June this year, with an initial 400MW and 48 MIGD coming online. The projects was awarded as a build, own and operate (BOO) contract to a consortium comprising of French power generation company GDF Suez and the Gulf Investment Corporation (GIC), an organisation promoting infrastructure development in the region. They constitute the Al Dur Power and Water Company, which be responsible for running the plant.

Both partners initially had an equal 50:50 stake in Al Dur. Following the sale of 30 percent of their stakes to a group of investors from Bahrain, GIC now holds a 25 percent stake in Al Dur and GDF Suez is the largest stakeholder, with 45 percent.

Hyundai Heavy Industries has been tasked with constructing the complex. BNP Paribas, Freshfields Bruckhaus Deringer and Mott MacDonald are advisors to the project.

Bahrain’s economy at a glance

According to the UN Economic and Social Commission for Western Asia, Bahrain had the fasted growing economy in the Arab world in 2006, with the country benefitting from its oil reserves and a burgeoning financial industry.

In 2008, Bahrain was named the world’s fastest growing financial center by the City of London’s Global Financial Services Index. Petroleum production and processing account for around 60 percent of export receipts, and 30 percent of gross domestic product.

Business Monitor International estimates that the country’s nominal GDP stood at US$19.20bn in 2008. Bahrain was attested to be the freest economy in the Middle East in the 2006 Index of Economic Freedom.

Upstream Energy Projects

It is no exaggeration to say that Bahrain is currently going through its most exciting E&P phase in more than seven decades. Four offshore exploration and production sharing blocks have been allocated, and drilling commenced this year.

Onshore, new depths are being plumbed to discover natural gas, and a host of enhanced oil recovery techniques are to be deployed to stem decline and increase production at the country’s 77-year old Bahrain Field.

The shift from a sedate, almost forgotten upstream hamlet, into a thriving hotbed of activity has been expedited and made possible by a dramatic overhaul of the energy business in Bahrain.

The National Oil and Gas Authority was born when three ministries with overlapping and blurred boundaries were streamlined into one body by Royal Decree in 2005, a sea change which the current flurry of activity can be attributed to.

Bahrain shares an offshore field called Abu Saafa with Saudi Arabia. It is estimated that this produces some 300 000 barrels per day, which is split 50:50. The product from Abu Saafa is sold directly as crude on international spot markets, and does not come to Bahrain.

Occidental Petroleum Corporation and Mubadala Oil & Gas, are working jointly on a development and production sharing agreement with the National Oil and Gas Authority of Bahrain (NOGA) for the further development of the Bahrain Field.

Under this agreement, a Joint Operating Company was formed to serve as operator for the project under the DPSA.

Oil production from the Bahrain field is expected to more than double to approximately 75 000 barrels per day within five years, and grow to a peak level of more than 100 000 barrels per day thereafter. Gas production capacity is expected to grow from the current level of 1.7 billion cubic feet per day to over 2.5 billion cubic feet per day under the Field development plan.

Oxy’s net share of production is expected to be approximately 28,000 barrels of oil equivalent per day (BOEPD) in 2010 growing to 56 000 BOEPD within five years. Mubadala’s net share of production is expected to be 18 500 BOEPD and 37 000 BOEPD for the same time periods. Net reserve additions over the life of the project for Oxy are said to be 450 million barrels of oil equivalent.

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