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
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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.


South Korea downgrades Japan trade status as dispute deepens

Updated 18 September 2019

South Korea downgrades Japan trade status as dispute deepens

  • The change comes a week after South Korea initiated a complaint to the World Trade Organization
  • The new measures in effect mean it might take up to 15 days for South Korean companies to gain approvals to export sensitive materials to Japan

SEOUL, South Korea: South Korea on Wednesday dropped Japan from a list of countries receiving fast-track approvals in trade, a reaction to Tokyo’s decision to downgrade Seoul’s trade status amid a tense diplomatic dispute.
South Korea’ trade ministry said Japan’s removal from a 29-member “white list” of nations enjoying minimum trade restrictions went into effect as Seoul rearranged its export control system covering hundreds of sensitive materials that can be used for both civilian and military purposes.
The change comes a week after South Korea initiated a complaint to the World Trade Organization over a separate Japanese move to tighten export controls on key chemicals South Korean companies use to manufacture semiconductors and displays.
Seoul has accused Tokyo of weaponizing trade to retaliate against South Korean court rulings ordering Japanese companies to offer reparations to South Koreans forced into labor during World War II. Tokyo’s measures struck a nerve in South Korea, where many still resent Japan’s brutal colonial rule from 1910 to 1945.
According to South Korean trade ministry, the new measures in effect mean it might take up to 15 days for South Korean companies to gain approvals to export sensitive materials to Japan, compared to the five days or less it took under a simpler inspection process provided for favored trade partners.
Lee Ho-hyeon, a South Korean trade ministry official, said the change would affect about 100 local firms that export items such as telecommunications security equipment, semiconductor materials and chemical products to Japan. He said Seoul will work to minimize disruption to South Korean companies.
Japan for decades has enjoyed a huge trade surplus with South Korea, an economy that’s much more dependent on exports. Many major manufacturers heavily rely on parts and materials imported from Japan.
But the dispute is taking a toll. Exports to South Korea from Japan fell 9.4% last month, Japan’s Finance Ministry reported Wednesday.
The trade dispute between the neighbors erupted in July, when Japan imposed tighter export controls on three chemicals South Korean companies use to produce semiconductors and displays for smartphones and TVs, major export items for South Korea. It cited unspecified security concerns over Seoul’s export controls.
A few weeks later, Japan dropped South Korea from its own trade “white list,” triggered a full-blown diplomatic dispute that took relations between the US allies to their worst in decades.
The dispute has spilled over to security issues, with Seoul declaring it plans to terminate a bilateral military intelligence-sharing pact with Japan that symbolized the countries’ three-way security cooperation with the United States in the face of North Korea’s nuclear threat and China’s growing influence.
Following an angry reaction from Washington, Seoul later said it could reconsider its decision to end the military agreement, which remains in effect until November, if Japan relists South Korea as a favored trade partner.
Seoul announced its plans to downgrade Tokyo’s trade status in August before holding a 20-day period to gather opinions on the decision, during which the Japanese government voiced opposition to the move it described as “arbitrary and retaliatory,” Lee said.
He said Seoul needs to strengthen controls on shipments to a country that’s “hard to cooperate with” and fails to uphold “basic international principles” while managing export controls on sensitive materials.
South Korea previously divided its trade partners into two groups in managing export controls on sensitive materials. Following Wednesday’s change, South Korea now has an in-between bracket where it placed only Japan, which would mostly receive the same treatment in trade as the non-favored nations in what had been the second group.