Boston, MA -- (SBWIRE) -- 01/10/2013 -- BMI View: Always limited in scale, Bahrain's oil and gas sector is limited in ambition; attempts to produce more oil and gas from its offshore acreage are unlikely to yield material fruit in the near-term.

Perhaps more significant are efforts to move into more lucrative petrochemicals value-adds related to its refining project at Sitra. The prospect of building an LNG receiving terminal is another potentially significant landmark, and the government has served notice that a decision on who to build it is expected before year-end 2012. Political unrest remains a key risk in Bahrain, but under the Saudi-assured security pact, we do not envisage unrest having a significant impact on the sector overall.

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We highlight these trends and developments in Bahrain's oil and gas sector:

- BMI sees Bahraini oil production rising to as much as 95,000 barrels per day (b/d) by 2021, in line with efforts to boost output at the mature Bahrain field. We expect oil consumption to grow to almost 60,000b/d.
- We expect both oil and gas reserves to decline in the period 2012-2021, pending new discoveries. Oil reserves are expected to fall to 112mn barrels (bbl) by 2021, with gas reserves falling to around 80bn cubic metres (bcm). According to Tatweer Petroleum, the joint venture between Occidental Petroleum (Oxy) and Mubadala Development Company, production increased by 33% in 2011 to 45,000b/d.
- Gas production and consumption are likely to grow in tandem to around 19.5bcm by 2021. - Risks to our forecasts include final approval for the expansion of the Sitra refinery, enlargement of the Saudi import pipeline, as well as for a proposed LNG import terminal to feed growing gas demand.
- State-run firms Bahrain Petroleum (BAPCO) and Saudi Aramco are considering a scheme to replace, upgrade and redirect a pipeline that links Saudi oil fields to Bahrain's only refinery. The project is expected to increase the capacity of the pipeline to 350,000b/d. The two countries are expected to finish the front-end engineering and design, or FEED, by the end of 2012, and open the tender in 2013. The estimated cost is around US$350mn.
- BAPCO is planning a major overhaul and expansion of its refinery at Sitra, with the aim of adding some 100,000b/d of capacity and additional petrochemicals production. This is a scaling back of the original plan to hike production to 500,000b/d, but welcome nonetheless. The project is expected to cost US$6.5bn and will take 18 months to complete.

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