By K S Sreekumar

 

The Middle East’s vast heavy oil resources indicate that heavy oil will be an important future energy source for the region, said Bahrain’s Energy Minister Dr Abdul-Hussain bin Ali Mirza. 

 

Those companies that have positioned themselves early in the heavy oil business are likely to win in the region, said Dr Mirza inaugurating the debut Middle East Heavy Oil Congress (MHOC).

 

“Our region has billions of barrels of heavy oil waiting to be extracted and, producing it will be the answer to solving the world's rising energy demand,” said Dr Mirza.

 

Although heavy oil costs more than lighter crude to produce, “our region can do it at a much lower price than many parts of the world”.

 

Tatweer Petroleum, a joint venture of three strategic partners --Bahrain-based nogaholding, US-based Occidental Petroleum and Abu-Dhabi-based Mubadala Petroleum – has been a pioneering heavy oil venture that has proved successful, he said.

 

Tatweer focuses on applying EOR techniques in the Bahrain field and is at the very forefront of the industry in thermal recovery of both heavy and light oils from carbonate structures. It has so far implemented 13 pilot projects and dug over 850 wells.

 

After the first five years of its life, Tatweer Petroleum successfully increased oil production by over 70 per cent and non-associated gas production capacity by 50 per cent.

 

“We have seen the success of EOR methods being successful in extracting heavy oil in some GCC countries. We will now have to get ready our own heavy oil strategies,” the minister said.

 

Meanwhile, Bahrain’s new 350,000-barrel per day (bpd) A-B oil pipeline to Saudi Arabia will be operational by the first quarter of 2018. Construction contracts worth $300 million have been signed recently between Bahrain and Saudi Arabia for the same, the minister said.

 

The new pipeline will replace an ageing 230,000 bpd link and enable Bahrain Petroleum Company (Bapco) expand the processing capacity of its 267,000 bpd Sitra refinery, he said. 

 

A contract to set up a multi-million dollar floating gas terminal off the coast of Bahrain will be awarded shortly. This will allow us to import 400 million standard cubic feet of gas per day (mmscfd), the minister added. 

 

Going back to heavy oils, the minister said although the Middle East has not generally been regarded as an area of high activity in the realm of heavy oil extraction, in the last 2-3 years, activity in this sector has increased immensely. The region is estimated the contain 970 billion barrels of discovered heavy and extra heavy oil resources, mostly undeveloped.

 

The heavy oil industry in the Middle East has a different set of challenges compared to other parts of the world due to the heterogeneous nature of the rocks. Technology is the key when tapping into unconventional resources, he pointed out.

 

Extra heavy oil is found in all parts of the world. But the challenge is that it is complicated and costly to produce. A lot of investments have been made in the refining sector with an eye on the heavy oil market. Refineries the world over have invested substantially in processing heavy oil and the trend will not change in spite of the oil price scenario obtaining now. Fuel demand will keep on increasing so will the production, he said.

 

However, what can change are the investment styles and venues. The focus is shifting to more economical production processes. Technology now allows conversion of heavy oil to lighter fuels at the production stage itself, which will considerably reduce production costs.

 

Proven global reserves of conventional oil amount to 1,000 billion barrels - enough for up to 50 years supply at the current rate of production. However, conventional oil and gas exploration finds are becoming increasingly harder to find and extract.

 

Heavy oil is now viewed as a strategic resource that can be produced intensively to supplement  the global supply of conventional hydrocarbons, extra-heavy crudes and bitumens have a role to play in meeting the world's future energy needs.

 

Heavy oils account for 25 per cent of the world’s petroleum resources equivalent to 20 additional years’ worth of hydrocarbon reserves. These unconventional oils are becoming an essential component of the future energy mix.

 

Tough market conditions prompt oil producers to cut costs of production to the maximum, which will remain the case for the next two years, he said.

 

Market analysts say while the previous oil price drop was largely due to a fall in temporary demand, the current oil price crash was caused by a new market player, shale.