Strengthening its position: Local petrochemicals facilities expand to meet growing global demand

Petrochemicals is the largest industry in Bahrain after aluminium, with ammonia, methanol and urea all produced locally. While steps are being taken to increase petrochemicals production in the Kingdom, one challenge that remains is ensuring the supply of natural gas at a price that allows Bahrain’s goods to remain competitive in the regional market.

EXPANSION PLANS: The largest player in this segment, Gulf Petrochemical Industries Company (GPIC), was set up in 1979 as a joint venture between nogaholding, the investment and development arm of the National Oil and Gas Authority (33.3%); Kuwait’s Petrochemical Industries Company (33.3%); and Saudi Basic Industries Corporation (33.3%). In 2011, GPIC, which relies on natural gas from the government as a feedstock, produced 1.58m tonnes of ammonia, methanol and urea, the bulk of which was exported.

At present, the company is moving ahead with an estimated $1.5bn-2bn expansion plan to increase its capacity to 3400 tonnes per day of ammonia and 5300 tonnes per day of urea. This boost in production of both commodities is aimed at serving the growing global fertiliser market. In 2011, GPIC produced 458,303 tonnes of ammonia, 443,034 tonnes of methanol and 673,681 tonnes of urea. Over the same year the company exported 71,536 tonnes of ammonia, 435,286 tonnes of methanol and 662,624 tonnes of urea.

SECURING INPUTS: The company’s 2020 strategy plan calls for new ammonia and urea plants once approval has been reached regarding future supplies of gas. As with aluminium, the ability of the industry to remain competitive in the region depends on the price of natural gas. In January 2012, the government raised gas prices from $1.50 to $2.25 per million British thermal units (MBTUs), affecting major customers such as Aluminium Bahrain, as well as downstream aluminium firms like Midal Cables, Bahrain Alloys Manufacturing Company and Gulf Aluminium Rolling Mill Company.

GPIC’s expansion plans depend on ensuring a sufficient supply of gas at a price that allows the company to be competitive. Following the price increase, Bahrain’s industrial customers still pay less their counterparts in the UAE, where gas prices average $3 per MBTU, but the Kingdom’s heavy industries are having to factor the extra cost into their overall business plans.

The government is not unaware of the growing demand for natural gas and has taken steps to increase supply both locally and from foreign sources. For example, Tatweer Petroleum, a joint venture between state-owned nogaholding (51%), US-based Occidental (29.25%) and Abu Dhabi’s Mubadala Development Company (19.75%), is overseeing projects at Bahrain Field and the Khuff gas reservoirs that are aimed at increasing gas production. At the same time, the government is looking into the option of importing gas, laying out plans for a new $800m liquefied natural gas (LNG) import terminal to be built near Khalifa Bin Salman Port. Bahrain is also conducting ongoing negotiations with Russia regarding LNG gas imports.

INCREASING EFFICIENCY: At the same time, projects like GPIC’s new carbon dioxide recovery (CDR) plant, commissioned in 2010, are designed to generate energy efficiency savings at the complex. The $52m CDR facility will enable the firm to recycle 450 tonnes of carbon dioxide a day, allowing it to boost production capacity of methanol and urea by 120 and 80 tonnes per day, respectively. Moreover, UAE-based Abu Dhabi Future Energy Company (Masdar) is managing GPIC’s registration for the UN’s Clean Development Programme, which will permit the manufacturer to earn carbon emissions reduction certificates in the near future.

GPIC has initiated a number of investment projects such as its new CDR plant, which is aimed at improving its energy efficiency and meeting international environmental standards. Moreover, once it has secured the necessary natural gas feedstock from the government as part of its future 2020 corporate strategy plans, GPIC will likely move ahead with its expansion programme. This will help put Bahrain in a better position to target sales in the growing global fertiliser market.