Bahrain’s Bapco sees oil trading opportunities as it expands refinery

A bird’s eye view of an offshore oil platform in Bahrain. (AFP)
Updated 10 March 2019

Bahrain’s Bapco sees oil trading opportunities as it expands refinery

  • The expansion will boost the capacity of its Sitra oil refinery to 360,000 barrels per day
  • The small non-OPEC Gulf oil producer, with around 124.6 million barrels of proven reserves, gets its oil revenue from two fields

DUBAI: Bahrain plans to commission its expanded oil refinery by early 2023, allowing it to sell and trade more petroleum products in the Gulf region and Asia, the chief executive of state-owned oil company Bapco said.
The expansion will boost the capacity of its Sitra oil refinery to 360,000 barrels per day (bpd) from the current 267,000 bpd, Bapco CEO Pete Bartlett said.
Bapco currently receives 220,000-230,000 bpd of crude from state oil company Saudi Aramco and will import the same volume during the refinery’s expansion, with commissioning scheduled for late 2022 or early 2023, Bartlett said.
In October 2018 Aramco and Bapco announced the commissioning of the AB-4, a new phase of the Saudi-Bahrain crude oil pipeline, capable of transporting up to 350,000 bpd, which would serve Bahrain’s planned refinery expansion.
“We are on track,” Bartlett said of the expansion.
The small non-OPEC Gulf oil producer, with around 124.6 million barrels of proven reserves, gets its oil revenue from two fields: the onshore Bahrain field, and the offshore Abu Safah field, which is shared with Saudi Arabia. The Bahrain field produces around 50,000 bpd.
Bahrain and top oil exporter Saudi Arabia split revenues from the 300,000-bpd Abu Safah field, where production is overseen by Aramco.
“Aramco and Bapco are strong partners and so our purchases of feedstock are unaffected by what OPEC is doing in terms of managing its own sales,” Bartlett said when asked whether Saudi exports to Bahrain would be affected by OPEC-led supply cuts.
The refinery expansion and resulting production increase may prompt Bapco to focus more on spot trading, but the company is unlikely to establish its own trading joint venture like other national oil companies in the Middle East, Bartlett said.
“We will buy more feedstock and will be trading more products,” Bartlett said, adding the company would continue to look also at trading spot cargoes.
“We will be looking to develop off-take arrangements and sale arrangements further but our core markets will remain within the greater GCC (Gulf region) and increasingly we will find ourselves competing for opportunities in Asia.”
Around 88 percent of the crude that Bapco refines comes from neighboring Saudi Arabia, and the rest from Bahrain’s field.
The refinery’s expansion project financing – which is over $4 billion in size – will be finalized in March, Bartlett said.
“We have been actively working with a number of export credit agencies and commercial banks ... We’re on the cusp of concluding the financing arrangements.”
Bapco had awarded contracts for the project to a consortium comprising TechnipFMC, Samsung Engineering and Tecnicas Reunidas.
Bahrain announced last year its largest ever oil discovery, off the coast, estimated to have at least 80 billion barrels of tight oil, and deep gas resources in the region of 10-20 billion cubic feet.
It is talking to US oil companies with shale oil expertise about developing those resources and hopes to have an interested company by the end of the year, the country’s oil minister said last month.


India probes Flipkart, Amazon discounts after retailers complain

Updated 15 October 2019

India probes Flipkart, Amazon discounts after retailers complain

  • Products on Amazon, Flipkart listed at steep discounts in sale
  • Trader groups allege firms violating foreign investment rules

NEW DELHI: The Indian government is looking into whether hefty discounts offered on Walmart-owned Flipkart and Amazon.com during their online festive sales violate foreign investment rules, a commerce ministry official told Reuters.
India introduced new rules in February aimed at protecting the 130 million people dependent on small-scale retail by deterring big online discounts. The rules forced e-commerce firms to tweak their business structures and drew criticism from the United States, straining trade ties between New Delhi and Washington.
While Amazon and Flipkart say they’ve complied with the federal rules, local trader groups say the two companies are violating them by burning money to offer discounts — of more than 50 percent in some cases — during the ongoing festive sales.
Reuters reviewed emails and internal training material from Flipkart showing the company is in some cases offering to reduce, or forfeit, its sales commission from sellers that offer discounts.
The commerce ministry official said the government was reviewing complaints and evidence filed by the Confederation of All India Traders (CAIT), a group representing some 70 million brick-and-mortar retailers, alleging Amazon and Flipkart were violating the foreign investment rules.
The official declined to comment on possible action, but executives from Amazon and Flipkart were summoned to meet commerce ministry officials last week to discuss the matter.
Flipkart in a statement said it had a “good meeting” with government officials and it was “deeply committed to doing business the right way in India.”
Amazon said it had an “open & transparent discussion” with officials and has a high bar for compliance.
Seeking to attract shoppers around the key Hindu festival of Diwali, both retailers have placed full-page advertisements in top national daily the Times of India to showcase discount offerings stretching from Samsung and Apple phones to clothing and diapers.
“Customers are going online because of the unbelievable discounts. Because of this sales at offline businesses are down 30 percent to 40 percent this month,” CAIT’s secretary general Praveen Khandelwal said.
Two emails received by Flipkart sellers in September, just days ahead of the inaugural phase of the festive sales, showed it offering to partly fund discounts.
The company would “burn” 3 percent of the discount if a seller lowered a product price by 15 percent, or 9 percent if the seller discounted by 30 percent, said one of the emails.
In training material posted on Flipkart’s restricted website for its sellers, seen by Reuters, the company asks them to prepare for the festive season by saying “nothing is bigger than this” and explaining how they can benefit by discounting products for Flipkart’s premium customers.
“We want to ensure that you fetch as much profit from it as possible ... whatever the discount you are offering, half of that will be reimbursed to you by Flipkart,” a post said.
A Flipkart source said the incentives were compliant with Indian regulations and were aimed at promoting sellers’ earnings by effectively reducing the commission they pay.
All India Online Vendors Association, whose 3,500 members sell products on various online platforms including Flipkart, in a statement said fewer than 100 of its members benefitted from Flipkart’s partial discount funding, giving some sellers an unfair advantage.