Bahrain has named US company Occidental Petroleum (Oxy) as the winner of a deep gas contract it had floated more than a year ago.

Oxy will now begin to drill for gas onshore in the Bahrain Field and could go up to a depth of 20,000 feet in the process, Oil and Gas Affairs Minister and National Oil and Gas Authority (Noga) chairman Dr Abdulhussain Mirza said.

'This means Oxy would start drilling for gas at no cost to Bahrain,' he said.

'All drilling costs would be borne by the company for the first seven years by when it would be known whether they have found results.

'If gas is located, there will be a negotiation process but if there is no gas, it would not be a loss to Bahrain,' Dr Mirza told our sister newspaper Gulf Daily News (GDN).

'Over the period of seven years, this may cost Oxy between $100 million and $200 million,' he said.

'We are not going according to the cost because it does not affect us,' he added.

Bidders, Oxy and Canadian Natural Resources and US-based Hess joint venture, had been shortlisted for the awarding of the tender last year.

This was after the tender was first launched late in 2008 when a number of companies had bid for the project.

'This is just the framework agreement that we have signed,' the minister said.

'Detailed negotiations will now take place and a final agreement would take a few months. Work on the drilling process would then begin,' he added.

Dr Mirza said Bahrain had been encouraged with the results neighbouring countries had achieved after they drilled to increased depths.

Bahrain National Gas Company (Banagas) general manager Shaikh Mohammed bin Khalifa Al Khalifa had earlier said that Bahrain planned to drill eight gas wells at a cost of $200 million to meet additional demand.

He said this would be done to meet additional demands over next five years until 2014.

Three of these wells, a part of the Khuff gas drilling programme, have already been completed and commissioned while a rig has recently mobilised to the fourth well where drilling operations have just begun.

The first well was drilled to a vertical depth of 10,550 feet into the Khuff reservoir while the second well was the first directional gas well drilled in Bahrain to a measured depth of 12,325 feet into the pre-Khuff formation.

The third well was recently drilled and completed to a vertical depth of 12,100 feet, also into the pre-Khuff formation.

Dr Mirza signed the agreement on behalf of the Bahrain government, Oxy chairman and chief executive officer Ray Irani inked the deal for the company. The signing took place at the Noga headquarters on the Exhibition Avenue.-TradeArabia News Service