World class refining
The Bahrain Petroleum Company (Bapco) was formed in 1929 ahead of the first oil discovery in the region in 1932, which was also the first location of such reserves within the countries of the Gulf Co-operation Council (GCC).
This then spurred the search for oil in neighbouring countries, resulting in the Arabian Gulf having the largest oil reserves in the world today. Since its foundation Bapco has been at the cornerstone of the Kingdom of Bahrain’s economic development, currently contributing around 70 per cent of the GDP.
Amongst other activities Bapco operates the Bahrain Refinery – a world class, world scale refinery, which has exported products across the world for the last 75 years. The two original crude oil units were built in the 1930s and are still in operation today. Over the years there have been many capacity expansions and modernisation programmes bringing the refinery up to its current production capacity of 265,000 barrels of oil per day (bopd). This is split between 86 per cent Arabian Light and 14 per cent Bahrain crude types.
The Bahrain Refinery is a mid-sized facility spread across an area of approximately 330,000 square metres, with a high degree of complexity. Crude is supplied to the refinery through dedicated pipelines from Saudi Arabian and Bahrain fields, with the refined products then transferred to the Sitra Tank Farm before being shipped from the Wharf to their various destinations. “The Bahrain Refinery is export-orientated with only eight per cent of its finished products consumed locally,” explains Ebrahim Talib, deputy chief executive for refining and marketing. “This is primarily gasoline. The remaining products are exported through the Sitra Wharf, including 55 per cent middle distillates, naphtha, and fuel oil.”
The strength of activity within the Arabian Gulf, and Middle East in general, has given rise to a number of new larger refineries coming on-stream in the region, which will tighten competition for export refineries such as the Bahrain Refinery. Ebrahim elaborates on how such developments will impact on the business, and how the refinery is looking to adapt to this new environment: “In the short term, the refining business will continue to be volatile. We believe that we have the right focus on maximum middle distillate production to be able to make the most of any opportunities that appear. It would seem that distillate refineries will have an edge over gasoline focused ones, as the demand for distillate continues to be strong. However, due to the worldwide economic slowdown and the fact that several new projects will be coming on-stream in our region in the coming years, there will be an excess of refining capacity.
“Hence, it is imperative that we remain focused on our core business, and improve our cost efficiency and competitiveness. Our main objective for the short to medium term is to demonstrate to our customers that we are the provider of choice at the lowest possible operating cost. In parallel, we have initiated our Refinery Master Plan (RMP) project, which will define the refinery configuration and capacity for the period beyond 2018, therefore addressing future market requirements for gasoline and fuel oil. The main driver for the project is bottom of the barrel upgrade, which will provide the greatest returns on investment, and will also allow Bapco to meet future demand – both from a quality and quantity perspective,” he continues.
To this end Bapco has successfully completed several major capital-intensive projects, with a number of others in the final stages at present. One such addition is the Low Sulphur Diesel Production (LSDP) complex, which includes a hydrocracker, hydrogen plant, and new ultra-low sulphur diesel (ULSD) hydrotreater, which was commissioned in mid-2007. The project was initiated to increase profitability by producing more valuable distillate products, and also addressing market requirements for ULSD. As a result, Bapco has the capacity to produce up to 100,000 barrels of ULSD over day, and was the first refinery in the Gulf area to have such large-scale production capabilities.
A number of investments have also been placed into improving environmental performance, including the construction of a new state-of-the-art sulphur handling facility producing premium solid sulphur pastilles. Not all investments offer a financial return but are testament to Bapco’s strong environmental health and safety culture. This is demonstrated by its refinery gas desulphurisation project, which serves to sweeten all fuel gas used in the refinery and improve the quality of process water, as well as the construction of an internal Class 1 landfill site to handle solid waste disposal.
“The main success in all the above projects is the fact that they have been brought on-stream successfully, without incident or injury. Our safety and performance records have been outstanding, and we have set the bar just as high for the two projects currently under construction,” comments Ebrahim. “The first of these is a steam turbo generator at a value of $180 million, which is expected to be completed later in the year. This is a project to replace equipment within our power and utilities generation facility, as Bapco still produces the steam, water and electricity need to operate and maintain the refinery. The second project for a wastewater treatment facility, with a value of $120 million, is another environmental development that has zero return on investment. This new facility is a first of its kind, using a combination of bio and membrane technology enabling us to treat the process water to the highest standards. We believe this is the future of waste water treatment in refinery applications, and therefore it is being constructed even though Bapco already meets waste water discharge legislation, to take these specifications to the next generation.”
As part of Bapco’s vision to diversify its product portfolio, in 2011 the company entered into a joint venture with Neste Oil and nogaholding of Bahrain to produce and market Group III base oils. This is achieved through the new Lube Base Oil facility, which is now fully operational at design capacities. The company has also been able to manufacture on-specification products ahead of schedule, which is testament to the working relationship between these partners.
“The joint venture facility is operated by Bapco, whilst the products are marketed by Neste Oil under its Nexbase brand. The components produced are very high quality Group III lube base oils, which are the integral blending components for the various high-end lubricant oils on the market. The market demand for these types of base oils is growing, and hence we expect to see more players in the market. However, we are confident that we have a competitive advantage since we have brought our project on-stream before the others. The quality of our products and regional position will ensure we maintain competiveness in this market,” notes Ebrahim.
Bapco still has plenty that it intends to achieve in the years ahead, primarily driven and defined by its RMP proposal. Notably this will represent the largest investment ever in the history of both Bapco and the Kingdom of Bahrain with an estimated cost in the order of $5 billion to $7 billion. “In the refining business our constant focus is on people, safety, environment, strategy and cost control, and getting everyone to contribute and align behind these five critical drivers will ensure our continued success. The RMP will define our refinery configuration for the future and will be a cornerstone in supporting Bahrain’s Vision 2030. We have completed initial viability studies and have focused on bottom of the barrel upgrade, energy efficiency and environmental compliance. In addition, a key decision point is the crude capacity for the refinery, as we want to increase this from the current 265,000 bopd to between 350,000 and 450,000 bopd. Based on current planning schedules, we will carry out the front-end engineering design between 2013 and 2014, to be followed by engineering, procurement and construction for completion by 2019,” concludes Ebrahim
The Bahrain Petroleum Company
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