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Bahrain's oil looks to seize 2013

Technical issues thwarted oil production in Bahrain last year

Bahrain, Oil production, Technical issues, COMMENT, Industry Trends

Technical issues thwarted oil production in Bahrain last year. 2013 is expected to deliver both an output rise and an investment spike for the upstream sectors

The Bahraini economy experienced a consistent and broad-based rebound in economic activity in 2012, according to figures and analysis released in February from the Bahrain Economic Development Board.

In spite of the unusually uncertain global backdrop, the projected pace of GDP growth for the year is likely to be significantly ahead of the 2011 figure.

Overall, Bahraini GDP expanded at an annual pace of 4.4% during the first three quarters of the year even if the headline growth rate decelerated fairly consistently from 5.9% YoY growth in Q1 to 4.3% in Q2 and 3.1% in Q3.

Encouragingly, these strong headline figures were led by a robust expansion in the non-oil sector as the oil sector actually contracted due to a temporary technical disruption at the country’s main Abu Sa’afa oil field.

The YoY growth rate in the non-oil sector during the first three quarters of the year was 7.2% whereas the oil sector contracted by 5.9%.

Three main factors account for the improvement in the performance of the economy: A protracted production disruption in the Abu Sa’afa oil field was the main drag on economic activity in 2012.

This was a technical issue which was eventually rectified, normal production started again in November. Simultaneously, production has been climbing up on the Bahrain field even though it fell short of original projections.

Much of the robust growth in the first half of 2012 – 5.1% in headline YoY terms – represented a rebound from disruptions during the first two quarters of 2011.

However, the Q3 national accounts data released by the Central Informatics Organization suggests that growth has gone past the rebound phase and has progressed at a fairly strong pace across the non-oil sectors.

Even though the Bahraini economy is relatively well insulated from developments outside of the region, exogenous shocks have repeatedly disrupted economic activity in the past through their effect on confidence, the financial markets, and the oil price.

As much as the global economic situation remains fraught with danger, the second half of 2012 was, somewhat contrary to expectations, characterized by relative stability as opposed to sharp shocks. This in turn has reduced global risk aversion and largely avoided the prospect of significant external disruptions.

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Bouncing Back
The hydrocarbons sector, due to technical disruptions, was a drag on Bahraini growth at a time when its performance in the broader region and globally was very strong.

The Abu Sa’afa field saw output levels fall below the norm for most of 2012 before the situation normalized in November. At the same time, ongoing efforts to boost output in the onshore field progressed slower than originally expected with the output reaching some 45,000bpd in 2012.

The end result was a negative contribution by the hydrocarbons sector to headline growth with a 5.9% YoY decline during the first three quarters of the year.

The challenges of 2012 will likely pave the way for a fairly significant improvement in oil sector growth in 2013. Output in Abu Sa’afa is expected to remain at full capacity, which would make Bahrain’s share 150,000b/d.

At the same time, Tatweer is expected to continue to make gradual progress in boosting output levels in the Bahrain field to an estimated 47,500b/d in 2013 according to the state budget statement.

The positive momentum in its oil sector is likely to drive a marked acceleration in Bahraini GDP growth this year. From a negative contribution in 2012, the hydrocarbons sector is likely to record one of its fastest annual growth rates in recent history.

At the same time, developments in the non-oil sector are likely to remain broadly comparable to those seen in 2012: steady consolidation supported by a fairly brisk pace of new bank lending.

Beyond this, the economy should benefit from planned large-scale industrial investments, which include an $4.8bln refinery upgrade by Bapco, a $2.2bln production line at Aluminium Bahrain (Alba), and an $1.2bln expansion by the Gulf Petrochemical Industries Company (GPIC).

Bahrain upstream Highlights
Gas Matters
Tatweer’s third phase of gas compression in the Bahrain Field near Hafeera was inaugurated in May of last year. The Compression Phase 3 project handles approximately 100 mmscfd of additional associated gas production, which will contribute to increasing oil production from the Field.

The compressors reinject this gas for reservoir pressure maintenance, effectively storing the gas for future production. The project has a total of 33 compressors in three stations and was constructed in approximately 6 months. The compressors now bring Tatweer’s total installed compression capacity to over 230 MMSCFD.

$17 million Well Deal
Aker Solutions was awarded a contract by Enerserv WLL to deliver 600 sets of surface wellheads and trees to the Awali Oilfield in Bahrain in the first half of 2012. This is the first surface wellhead contract won by Aker Solutions in Bahrain. The total contract value is US$17 million.

The first delivery will be a total of 45 sets of surface wellheads and trees that will be delivered in June this year.

The contract will be delivered out of Aker Solutions’ surface products manufacturing centre in Batam, Indonesia, and supported in Bahrain by the oilfield service centre at Ramsis Engineering, a sister company of Enerserv.

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