Intíl Newspapers and Think Tanks View of Bahraini Oil Discovery?

2018-04-17 - 1:16 am

Bahrain Mirror (Exclusive): Bahrain's biggest-ever oil discovery couldn't have come at a more crucial time, but anyone expecting a sudden revival in the country's financial fortunes is likely to be disappointed, as international Bloomberg agency, which is specialized in financial reports, described it in an article. The agency justifies this opinion saying "the investment and time needed to extract the oil and the impossibility of predicting at what level prices will be when it's recovered will mitigate any immediate optimism from the announcement."

"It's definitely positive news and raises hopes that the Bahraini fiscal burden might be eased in the future," said Sergey Dergachev, who helps oversee about $14 billion in assets at Union Investment Privatfonds in Frankfurt. "That said, we need more clarity on how large the oil and gas findings are, by when these reserves will be extracted, how much will it cost to develop this field and when they will generate cash flows to support the budget."

A report by "Stratfor", an American geopolitical intelligence platform, conveys a darker detailed image for the future of the Bahraini oil discovery. It stresses that "while the field's discovery may be significant, it won't be able to solve Bahrain's financial and economic challenges overnight - or even within the next few years." In his announcement, Oil Minister Mohammed bin Khalifa Al Khalifa did not set out a budget or road map for the long-term development of the Khaleej Al Bahrain field.

"However, any talk of Bahrain's oil riches matching those of other small Gulf monarchies such as Kuwait, Qatar and the United Arab Emirates is premature," Stratfor confirms, indicating that "it's not clear how much of the hydrocarbons will actually be recoverable; the touted figures are ‘in place' resources, and they are in rock formations known as ‘tight oil' and ‘tight gas,' meaning they have low permeability (similar to U.S. shale formations), which hinders the flow of hydrocarbons."

It further explains that "extracting the oil and gas in the new field will require expensive techniques, and Bahrain will still not be able to withdraw a large majority of it."

According to stratfor the "Bahrain field will be a valuable asset as the country tries to regain investor confidence. But given the challenges it faces, Bahrain won't see a major economic boost until the mid-to-late 2020s."

As for the tight oil, Bahrain needs "five to 10 years before production begins in substantial volumes".

"But for now, the country will remain under harsh financial constraints, relying on GCC support as the government attempts to use long-term promises to boost domestic investment in the present," the center says.

For its part, "The Financial Times" notes that although the 80bn number announced by Bahrain for its reserve is impressive, Bahrain still has a long way to go before it can turn the discovery, which also includes substantial gas resources, into revenues. The newspaper says that "one important obstacle: the discovery is in shale rock offshore, and no one has yet managed successful production from that type of reserve."

Author Ellen Wald in the international "Investing" financial website believes that "with this new unconventional oil and gas field discovery, Bahrain could become a significant natural gas exporter." However, she points out "Just how significant will become clear when Bahrain reveals more details about the extent of the field, Bahrain's timeframe for production and how expensive it will be to produce the oil and gas." As an example on the difficulties, the author recounts the state of its neighbor, Saudi Arabia.

In 2018, Aramco announced the discovery of its own shale oil fields. The Jafurah field, rivals the Eagle Ford in size. Aramco is specifically looking at using fracking to produce more natural gas. However, it is unlikely at this point that Saudi Arabia would try to produce significant amounts of oil from fracking, because it produces plenty of oil from conventional fields and does so at costs far below what it would face in a fracking enterprise.


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