Two large oil and gas discoveries reported offshore Bahrain, but viability questioned

Bahrain’s National Oil and Gas Authority has announced a potentially giant offshore oil discovery in the Khalij al-Bahrain basin.

Offshore staff

LONDON – Bahrain’s National Oil and Gas Authority has announced a potentially giant offshore oil discovery in the Khalij al-Bahrain basin.

This follows the award of a contract last year to Schlumberger to drill two offshore exploration wells.

Tom Quinn, senior analyst, Middle East upstream, at Wood Mackenzie, said: “We understand the first well encountered oil – it was completed in October 2017 and is located to the south of Bahrain, not far from the Saudi maritime border.”

Another well encountered deep gas in two accumulations below the Bahrain field. Official estimates for the resources suggest 81.5 Bbbl in-place for the oil discovery, and 13.7 tcf for the deep gas find.

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

According to a Reuters report, Halliburton will drill two appraisal wells later this year to further evaluate reservoir potential, optimize completions, and initiate long-term production.

“Core analysis by Schlumberger suggests the oil formation could be classified as a borderline conventional-unconventional play,” Quinn continued. “A tight reservoir means a low recovery factor and only a fraction of the 80-plus billion barrels is likely to be recoverable. The oil will also be technically challenging and potentially high cost to develop.”

Bahrain will likely approach international partners to contribute funding and technical expertise for a potential development, but Quinn pointed out that the country’s previous oil contracts came with severe fiscal terms by international standards, and the IOC partners involved only achieved meagre returns.

So new fiscal terms would be needed to attract suitable partners.

Production is declining from Bahrain’s onshore field, currently around 45,000 b/d, while output from the Abu Sa’fah field shared with Saudi Arabia is 150,000 b/d.

The country also imports crude from Saudi Arabia through a pipeline that is currently being expanded – deliveries are to the Sitra refinery.

Bahrain is installing an FSRU to import LNG with a nominal capacity of 800 MMcfd/, due to come online early next year, and the country will probably need the entire gas import capacity until the new discoveries come onstream.

04/05/2018

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