Bahrain discovers 80bn barrels of shale oil offshore

Bahrain’s largest hydrocarbons discovery contains at least 80bn barrels of shale oil, potentially providing a much-needed fillip for the Gulf state’s struggling economy, the kingdom said. The offshore field also contains an estimated 10tn-20tn cubic feet of deep gas reserves, the national oil and gas authority said. Sheikh Mohammed bin Khalifa Al Khalifa, the oil minister, said appraisals by Halliburton and DeGolyer & MacNaughton of the US had confirmed the “find of highly significant qualities of oil in place”. Bahrain was the first Arab nation to start producing oil in 1932, but it has limited hydrocarbon resources and is one of the poorest of the six Arab Gulf states. It depends on oil revenues from an onshore field that was producing about 44,000 barrels a day in 2017, according to a government bond prospectus, and an offshore field from which Manama shares half the revenues from the roughly 300,000 b/d produced with Saudi Arabia. Sheikh Mohammed said it was not yet clear how much of the new oil discovery would be recoverable, but the kingdom will look to international companies to help develop the resource.

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The high cost of developing offshore shale oilfields can reduce the profitability of such reserves. “They need to show they can make a commercial proposition of it,” said Robin Mills at Qamar Energy, a consultancy. “No one has ever done shale offshore anywhere in the world. Although this is shallow water, not only do they need to get decent flow rates they need to balance that with the cost of drilling.” Using US shale fields as an example, Mr Mills said about 5-10 per cent could be recoverable. Halliburton said the discovery, in the 2,000 sq km Khalij Al-Bahrain basin, is close to an oilfield that is already producing, which could reduce the cost of development. Bahrain has agreed with Halliburton to drill two more appraisal wells this year to evaluate the potential and start long-term production, Sheikh Mohammed said. With production at the first well targeted for August, officials said the broader field could be in production within five years. Bahrain’s economy has been struggling since the kingdom was hit by weeks of unrest during the wave of popular uprisings that swept the Middle East in 2011. It has also been battered by the prolonged period of low oil prices, forcing the government to tap into its foreign reserves while state debt has risen to 82 per cent of gross domestic product. Projects funded by neighbouring Saudi Arabia and United Arab Emirates buoyed growth to 3 per cent in 2016, the IMF said. But it forecasts that growth fell to 2.3 per cent last year and will slow to 1.6 per cent in 2018. Bahrain’s sovereign bond yields have fallen on the news of the oil discovery. The kingdom sold a $1bn bond last week at a 6.875 per cent yield, which has since rallied to 6.4 per cent. Additional reporting by Rob Smith in London

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