BAPCO Bahrain

How do you see the future evolution of oil prices in the global market and what were the effects of the fluctuation on your operations?

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: I think the prices of oil that we have seen and the increased trend in price is totally abnormal and I think people were aware of this and that some correction will take place. With the changes in the economic climate, it may provide some opportunity for correction. It will provide a chance for stabilization and I think the prices may go up and improve but I think if we think about seeing prices of the past like 147 I don’t think we will see this in the next 3-5 years. I think 70-80 dollars is quite realistic for the next year or two. The government has been impacted in terms of revenue due to oil prices as well.

What is the optimal price of oil for Bahrain?

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: The higher the better for Bahrain because we rely heavily on the oil that we sell. The income from the oil business accounts for over 70% in the government’s income. In Bahrain oil comes from two places one of them Abu Safa crude is a field we share with Saudi Arabia and the total production is 300,000 barrels a day and we share 50% so we get 150,000 barrels that BAPCO Bahrain sells on the behalf of the Bahraini Government. The other source of income for the government is from the refinery. We have our own indigenous crude of 35,000 barrels a day and our refinery can handle 250,000 barrels. Most of the oil we process is coming from Saudi Arabia with 135,000 barrels a day. The money BAPCO Bahrain makes as a result of processing crude is a source of income for the government. Between what BAPCO Bahrain pays and what BAPCO Bahrain gets from the sale of products, the bigger the margin is the better it is for Bahrain but unfortunately the margin has not been that good but thank God we have been doing reasonably well and are still making money despite the susceptibility of the refinery business to economic changes. It is very easy for a refinery to go into the red.

BAPCOs top priority this year has been the upgrading and expansion of its refinery activities, has this plan been put on hold in light of the crisis or would you still like to expand your capacities?

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: The plan for the refinery is that we are in a study phase at the present time. We have developed a process whereby we want to develop a master plan for modernization and expansion of the refinery and we have the green light from our board to go ahead and do the study and we are going to do that. By early next year we should have a proper plan in place to submit to our board for approval and only then will we be able to say whether we want to defer or go ahead with this plan depending on the economic situation. BAPCO Bahrain has a number of projects that BAPCO Bahrain wants to do but we will have to judge them in terms of priority, economic viability, and economic return and we have to schedule them in a proper way. However, we have not put anything on hold as a result of the current economic situation.

Don’t you think it is wise to expand your capacities now so that when the prices pick up you will be able to sell more than the other companies?

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: Expanding the capacity is one of the projects that we have as a part of the study we are going to do regarding the master plan. One of the projects we have in mind is to upgrade the refinery. Right now 15% of the products we produce is fuel oil which is sold at a lower price than others and if we can convert more of this oil to lighter more valuable products the more we can increase our profitability. We would like to reduce fuel oil to 3-5% and this is a big project that may cost 1.5 billion dollars.

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: Another project we have is to increase capacity. Currently our refinery is very old and was commissioned in 1936 and over the years we have been expanding and today we are operating it with 5 crude united. If we were to build a modern refinery today with the same capacity as ours you would only need 1-2 crude units maximum and with 5 units we need more manpower and we can reduce costs by replacing and increasing our capacity. At present our thought is to increase the refinery capacity from 250,000 to 350,000 barrels a day; but this needs to be studied further. If we increase our capacity here then we also need to increase the capacity of the pipeline that brings crude from Saudi Arabia and this is another project we are working on actively and this could be between 300-400 million dollars. Another project is for gasoline which is a challenge for Bahrain due to the increase in the number of cars here each year. We have been an export refinery for gasoline and we produce 18,000 barrels of gasoline a day where 6,000 is exported and 12,000 is used locally.

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: By 2015 we may be able to only meet the local markets needs so what should we do? Should we make a plant to meet Bahrain’s needs in 2015 or delay this project and import gasoline? We also need to study this to address the challenges of meeting demand and meeting environmental regulations. At the present time we are working with a Finnish company producing high viscosity lube based oil and this is very high quality lubricant.

So all in all you want to take the current refinery institution and modernize it?

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: Absolutely. I would say keeping our fingers crossed and assuming the economic climate improves I think the refinery will be a very busy place in terms of modernization for the next 5 to 10 years. I think at the end of it we are going to have a very profitable refinery that is totally acceptable from a business point of view.

What is your policy towards the green issue?

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: BAPCO has been a very responsible company as far as environment is concerned. For many years we have had a group of people looking after protecting the environment even since the 1960’s before environmental laws existed in Bahrain. When the regulations did come out the government appreciated our experience and got in touch with us to help review the various regulations and we were instrumental in helping the government in the development of the current regulations. BAPCO Bahrainbeing a very old company realized that there were certain areas that we didn’t meet the current modern regulations and we sat with the governmental environmental agency and we made a compliance plan to see how we could get where we wanted to be through a variety of projects that we implemented to help take us to where we wanted to be. We have spent 400 million dollars on these projects and they have no economic return but they are solely for the environments sake. In 2007 we won the Robert W. Campbell aware from the National Safety Council for being the best company in the world to achieve business excellence through the application of environmental health and safety principles and we were the first country outside of North American to win this very prestigious award.

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: BAPCO Bahrain is also working with the Wharton School in the US developing a case study as to how BAPCO Bahrain managed to reach this business excellence through the application of EHS and we are in the final stages of this case study. BAPCO Bahrain considers looking after the environment as its corporate social responsibility and BAPCO Bahrain is a company that is part of the community. We also are working to produce booklets about the environment and we want to take them to the schools. There is an award we give out every year to high schools for the submission of an environmentally based project that is judged and the top three schools receive projects. Educating the youngsters to be concerned about the environment is very important to make an impact later. Environmental health and safety week at our company is also important for both our employees and their families and we educate them too on these important issues and this has been a major success with 22,000 people in attendance most recently. Our concerns with the environment do not end with the boundaries of BAPCO Bahrain. The refinery gas desulfurization project is another very important project I must mention. When we process crude oil there you end up with sulfur and H2s and the Bahraini regulation requires this to be controlled at 600 PPM and we have designed a plant to reduce this to 150 PPM and we consider this a worthwhile investment at 150 million dollars.

If you were to compare this refinery to others in Europe and North America and if you would compare the legislation as well, what would be the result? How environmentally conscious is your operation compared to your counterparts?

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: I think the good thing about the regulations we have in Bahrain is that they are very stringent because we have used the most stringent regulations as a reference when formulating ours here. For example, BAPCO has looked at the Environmental Protection Agency for inspiration and with that, some of BAPCO’s regulations are more stringent than those in Europe. There are some areas that BAPCO is still working on for example, waste water treatment. Right now BAPCO has two stages of treatment and BAPCO uses sea water for cooling but when you put the sea water back in the sea it may be polluted with oil but before we put it back we put return water through some treatment to remove any pollutants from the water before we put it back. We are going to go one stage further by putting a third level of treatment into the system to be able to put it back in the sea as clean as possible. It doesn’t only remove oil but also chemicals from the water.

What is your main challenge in this business?

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: The biggest challenge for me is really something that isn’t under my control. Anything that is under BAPCO Bahraincontrol is manageable because we have a very strong team to conquer problems. The only problem we have is the market that fluctuates beyond our control and affects our margins.

What is your dream and vision for Bahrain and what is the role BAPCO Bahrain is playing in this vision?

Abdulkarim Al Sayed, CEO of BAPCO Bahrain: Bahrain is a very small country and you hardly can see it on the world map and maybe we are not as rich as our neighbors but we are very rich in one thing: human resources. I think amongst The Gulf and even outside of the area we are known for our work ethics, the quality of our work, and our workforce. Bahrain is bringing in more and more innovative things like the BIC which are attracting attention to the country. Additionally, because we are an old country we have a rich history that includes a business history so we are very experienced in that respect. I think we have a lot of opportunities here due to the amount of assets we have access to and it is our responsibility to invest in long term projects to benefit Bahrain. One example of BAPCO Bahrain doing this is by signing exploration contracts to search for oil here in Bahrain. We would also like to go into the field of gas exploration and production and importation. With this, the economy will improve and there will be more opportunities for future projects. For me, as a chief executive in the oil business, I feel I am responsible to take care of my affairs in BAPCO Bahrain but also contribute towards the economy of Bahrain in its long term endeavors and we are trying to do this through all of our new projects. I am very hopeful that we will be successful in changing the shape of Bahrain’s oil and gas sector in the future.

Tags: Bapco, Bahrain