Bahrain Oil and Gas: Interview with Bahrain National Gas

Interview with Dr. Mohamed Bin Khalifa Al Khalifa, General Manager of Banagas

I would like to know your vision of the Middle East’s future development with regard to its oil & gas sector.

As you know, the Middle East plays a big role in this sector, and particularly the Arabian Gulf countries. Their reserves are very important. This region contains more than 40% of world oil and gas.

The Middle East, with Iran and Qatar, is the main gas producer in the world after Russia, and in terms of oil Saudi Arabia is no.1 oil producer in the world. Bahrain depends on oil and is still active in the field of oil discovery and land enhancement to increase the oil productivity.

However the government has been working for about 15 years on the diversification of the economy and a shift away from oil dependency. Sectors like business services, tourism, finance, logistics, etc have been given more importance.

Natural gas is used mainly by the industry sector. Liquefied petroleum gas is much rarer. Banagas is the main LPG producer.

What are the main products and services provided by Banagas?

We treat LPG to produce 3 main products: propane (80,000 tons/year) and butane (same quantity) and naphtha (190,000 metric tons/year). This is our main objective. Our other objectives are to create employment and increase the income of shareholders.

Another company was formed: Banagas Expansion Company. Banagas is a joint venture between NOGA (National Oil & Gas Authority) Holding, Chevron and APICORP (Arab Petroleum Investments Corporation). The second unit (Banagas Expansion) is solely owned by the government (NOGA Holding). It’s only the legal framework of Banagas. Banagas is the main company.

Who are your clients?

We export propane, butane and naphtha. We are an export-oriented company. Our clients come from mainly from the Far East. Initially, Japan was our first client. In the last 10 years our clients varied: they came from the Near East, India, China, Indonesia. Many of our clients are reached indirectly through a trader. We renew the contracts with our clients on a yearly basis.

What’s the key to success? How do you attract clients?

Good price, and the importance of LPG as petrochemical feedstock. We are also converting our propane in order to increase its value added for our shareholders our people consider a real asset.

So what is your strategy, where are you heading?

Of course we have a strategic plan. We need to take on more challenges. We are also waiting to see the outcome of the discovery of offshore resources that is currently being made. The exploration activities for oil and gas will grant us bigger quantities and allow us to increase our production and growth. We will receive the first results of the exploration of one or two wells by the end of this year or the beginning of next year hopefully. International companies are currently drilling the wells, using new technologies. We are hoping to discover a good portion of reserves.

Our strategy for growth is planned in collaboration with the NOGA. We now want to treat our products for a higher value added.

What is Banagas’ main contribution to Bahrain?

Banagas is considered one of the most successful companies in Bahrain. After its inception, within 18 months, the investment of our shareholder was reimbursed. During the last couple of years, the financial crisis hasn’t affected us much. Banagas’ contribution to the economy comes in many forms:

1) Benefit to the shareholders;
2) Banagas, though owned 75% by the government, acts as a commercial company by buying gas, which is another contribution; all of our purchases are made on the local market.
3) Employment. We have about 450 employees.

Banagas is owned 75% by the government. What about the rest?

The other 25% is owned partly by Chevron and partly by APICORP, Arab Petroleum Investments Corporation. They are based in Saudi Arabia. They were formed by the OAPEC (Organization of Arab Petroleum Exporting Countries). Their role is purely financial. Chevron, a well know an American Oil International Corporation on the other hand, is more involved in the sector.

What is the company’s turnover per year?

$300 million. We distribute about 180-200 millions as dividends. The company is extremely profitable to its shareholders. Especially now that the prices are going up. Our current revenue in this Quarter is 70% higher than our budget due to high trend of LPG prices in this quarter in particular.