Game-changing find is made off Bahrain

5 Apr 2018 23:00 GMT

Bahrain has claimed that it has made its largest ever oil and gas discovery, estimated to hold 80 billion barrels of tight oil and multi-trillion cubic feet of gas, writes Nishant Ugal.

The new discovery has been made in the offshore Khalij al Bahrain basin, spread across more than 2000 square kilometres in shallow waters off the country's western coast, the government claimed.

Industry experts have suggested that Bahrain’s new oil and gas discovery could prove to be a game-changer for the tiny oil producer, which is grappling with high level of debt and a widening budget deficit.

However, others have expressed caution, noting that the tight reservoir poses serious technical challenges and has significant cost implications.

Oil Minister Sheikh Mohammed bin Khalifa al-Khalifa told reporters in the capital Manama that the new resource is "understood to dwarf Bahrain's current reserves”.

Al Khalifa claimed that "DeGolyer & MacNaughton’s and Haliburton’s independent appraisals have confirmed NOGA’s (the National Oil & Gas Authority's) find of highly significant quantities of oil in-place for the Khalij Al Bahrain", with tight oil amounting to at least 80 billion barrels, and deep gas reserves in the region of 10 trillion to 20 trillion cubic feet.

The tight oil find is said to be accompanied by a huge associated gas resource, in addition to a separate deep tight gas reserve.

“The other discovery is tight gas discovery and we’re in the final stages of evaluating it with Schlumberger and Halliburton,” the minister was quoted as saying according to local reports.

Al Khalifa added that an "agreement has been reached with Halliburton to commence drilling on two further appraisal wells in 2018, to further evaluate reservoir potential, optimise completions, and initiate long-term production".

DeGolyer and MacNaughton's senior vice president, John Hornbrook, said that the oil in place of 80 billion barrels is based on a probable resource estimate.

Al Khalifa noted that Bahrain was still unsure as to how much of the estimated 80 billion barrels of tight oil find was recoverable, but said the kingdom aims to attract foreign oil and gas firms to develop the resources.

Wood Mackenzie's Middle East upstream analyst Tom Quinn said Bahrain's previous efforts to lure foreign investors have come up short, and agreed that the discovery's size does not ensure its commercial potential.

"While the scale of discoveries is very large, more information is needed to establish how much of the resource is commercially recoverable," Quinn said.

Core analysis from wells drilled last year by Schlumberger suggests the oil formation could be classified as a borderline conventional/unconventional play, he argued.

"A tight reservoir means a low recovery factor and only a fraction of the 80+ billion barrels is likely to be recoverable. The oil will also be technically challenging and potentially high cost to develop," he said.

Quinn added: “NOGA will be approaching international partners to contribute funding and technical expertise. However, Bahrain’s previous oil contracts had tough fiscal terms by international standards, and the IOC partners made meagre returns. Therefore new fiscal terms will be needed to attract suitable partners.”

The first appraisal well in the drilling programme is planned to spud in August, while over the next two years the focus will be on maximising production and commercial efficiency.

Bahrain’s oil discovery, which experts say could be producing within five years, is thought to be one of the largest new hydrocarbon finds in the Middle East region in years.

This most recent oil and gas discovery could prove transformative for Bahrain, which presently turns out about 45,000 to 50,000 barrels per day of oil from its Bahrain onshore field.