Bahrain Petroleum Company


The Bahrain Petroleum Company is an integrated petroleum company that is the national oil company of Bahrain.
It was founded in 1929 and discovered the first oil field in the Persian Gulf outside of Iran in 1932. Shipments of crude oil commenced in 1934 and in 1936 the first refinery in the Gulf outside of Iran was built. The founders were the American Standard Oil of California, which was soon joined by Texaco, operating under British rule. While Bahrain never was a high-volume crude oil producer, the American joint venture a few years later came into possession of the vast Saudi Arabian oil reserves, which are located on the mainland in the vicinity of Bahrain Island. Supplied from the mainland, the refinery though exceeded the capacity of the Bahrain oil field from its inception and was among the largest in the region. The Bahrein concession was the first of 3 concessions awarded exclusively to American interests in the Middle East and was followed by Aramco in Saudi Arabia and by the joint venture active in the Saudi Arabian–Kuwaiti neutral zone.

Overview

BAPCO was established in 1929 in Canada by Standard Oil Company of California for oil exploration activities in Bahrain. It took over Bahrain's assets of Gulf Oil. In 1930 it obtained the only oil concession in Bahrain. BAPCO discovered first oil in 1931. On 31 May 1932, the company discovered the Bahrain Field. After exporting oil and constructing a refinery, it started with refining capacity in 1936. Later that year the Standard Oil Company of California signed an agreement with Texaco, which acquired a half of BAPCO's shares. In 1975 more than 60% BAPCO's shares was acquired by the Government of Bahrain. In 1980, all BAPCO's shares were taken over by the Government of Bahrain. In 1978 the oil sector was nationalized and BAPCO assumed full control of the national energy sector. In 1999, the current Bahrain Petroleum Company was created when the Bahrain National Oil Company, established in 1976, merged with BAPCO. In 2018 BAPCO commissioned a new pipeline that replaced the over 70 years old pipeline infrastructure between Bahrain and Saudi Arabia. In March 2019 construction work was started to upgrade the main oil refinery Sitra. The $5 billion project will increase the capacity to. Abdulrahman Jawahery is CEO of the BAPCO.
In August 2021, BAPCO signed a five year agreement for catalyst management with Chevron Joint Venture for $240 million. The clean fuels group specialist Advanced Refining Technologies which is the joint venture of Chevron and W. R. Grace & Company, will supply there Resid Hyrdocracking catalyst technology for the new Resid Hydrocracking unit that is to be operational by 2023.
In October 2021, BAPCO was released from the base oils joint venture with Neste and Nogaholding, ending the presence of Neste in Bahrain.
On 6 February 2022, BAPCO signed a Memorandum of Understanding with Aluminium Bahrain B.S.C. for the implementation of Environment, Social and Governance initiatives.
In 2023, BAPCO became part of the BAPCO Energies brand together with Bahrain National Gas Company, Bahrain National Gas Expansion Company, Bahrain Aviation Fueling Company Tatweer Petroleum, and Bapco Retail Company.
BAPCO is a founding company of the Gulf Downstream Association.
The Bapco Modernisation Programme completed the construction of the main control building in July 2023 and celebrated with a ceremony, in which for the first time ever in the Middle East a three-dimensional model of the BMP was presented. The ceremony was attended by Nasser bin Hamad Al Khalifa, who was also given a tour of the facilities and briefed about further BMP project progress. The BMP was 90% complete by August 2023.
In July 2023, Bapco Energies launched its Sustainability Linked Finance Framework, which fits into Bahrain's sustainability and climate change commitments to reduce emissions by 30% by 2035 and a net zero by 2060. In accordance with Bahrain's new energy strategy, Bapco Energies B.S.C began additional developments in August 2023 to become an energy company with fossil fuel based renewable energies. The company aims to generate 20% of Bahrain's energy from renewable sources by 2035 and continues to seek investment opportunities in renewable energy projects and carbon reduction technologies.
In March 2024, BAPCO began a cooperation with TotalEnergies in order to optimize its Sitra refinery. A strategic partnership between the two companies, which began in July 2024, provides BAPCO with additional market opportunities and trading strategies, as well as access to TotalEnergies' networks.

Operations

BAPCO is an integrated oil company operating in the field of refining, and marketing. It operates a oil refinery which lies midway between the original BAPCO expat workers accommodation township of Awali and Sitra. The complex also includes storage facilities for, a marketing terminal, and a marine terminal. 95% of the company's products are for exports. About one-sixth of this crude originates from the Bahrain Field, with the remainder being pumped from Saudi Arabia. Saudi Aramco supplies approximately through the pipeline from Aramco's Abqaiq Plant. Once the flagship Sitra refinery's expansion is completed in 2023, its capacity will be increased from 267,000 bpd to 380,000 bpd.

History

On December 2, 1925 the British Eastern and General Syndicate acquired from the Sheik of Bahrain an oil concession over 100,000 acres with exclusive right to develop the area. Shortly thereafter the concession was extended to cover all of Bahrain. On November 30, 1927, the Eastern Gulf Oil Co. subsidiary of Gulf Oil bought an option on the concession, to be exercised before January 1, 1929. Gulf Oil was at the time a shareholder in the Near East Development Corporation which held a 23.75% stake in the Iraq Petroleum Company. Thus, Gulf Oil was bound by the Red Line Agreement, which stipulated that the company would not be allowed to exploit Bahrain oil without the involvement of the other members of IPC, or rather, if they did, they would bear all the downsides of exploration and still would have to share the spoils with the rest of the group. When IPC was unwilling to exercise the option jointly, Gulf Oil on December 21, 1928 sold it to the Standard Oil Company of California.

Terms of the concession and British resistance to American participation

The agreement was divided into a 2-year exploration phase, covering all of Bahrein, a surface search not exceeding 20 feet of depth for signs of hydrocarbons, followed by a 2-year prospecting phase at the end of which a mining lease over 100,000 acres divided into no more than 3 blocks was to be awarded, followed by a 55-year mining lease period.
A considerable diplomatic back-and-forth developed during the following years in which the British government asserted its political influence when after a lack of British investment United States capital was attempting to gain access under the terms that were apparently, in the eyes of Britain, not meant to apply to foreigners.
On December 2, 1927 the exploration license was extended for one year by the Sheikh. The British Secretary of State for the Colonies Leo Amery in June 1928 instructed his Political Resident in the Persian Gulf to effect an alteration of the concession to include the stipulation that the lease holder had to be a company under British or British Dominion law. The Eastern and General Syndicate sent 3 geologists to the island in the winter of 1927/1928 and by October 1928 had decided to attempt to get a further extension of the exploration phase and send more geologists. When EGS could not find a British company willing to invest in the enterprise, they turned to an American company that was as member of the Iraq Petroleum Company subject to the Red Line Agreement and thus not outright able on their part to work the concession without first getting approval from the consortium. EGS had received one pessimistic prospect for oil from their first geologist, 4 optimistic prospects thereafter and were at the time planning to send geologist #1 back again to reexamine all available evidence. Secretary Amery, acting via the Colonial Office, then tried to get the British company clause inserted by asking EGS to try and insert it in the course of obtaining their second licence extension, to which EGS objected, because it would have alienated their option holder Gulf Oil and would have put EGS at risk of losing the concession and stranded their investment. EGS in turn wanted the British government to lean on the Anglo-Iranian Oil Company or through AIOC on the Iraq Petroleum Company. The lack of interest shown by AIOC and the Gulf Oil purchase of an option applied also to other EGS concessions that had been won: in Kuwait, Hasa province and the Neutral Territory between Saudi Arabia and Kuwait. It was Gulf Oil who had approached EGS after talking to an EGS geologist who had returned from the Middle East to the United States. Two agreements were signed on November 30, 1927: Gulf Oil's option on the Bahrein concession and Gulf Oil's option on all other EGS concessions. EGS paid the 10,000 rupees annual royalty to the Bahrein state on December 2, 1928. Standard Oil of California, not restricted by the Red Line Agreement, had in the meantime bought the option from Gulf Oil and on January 11, 1929 had incorporated a Canadian subsidiary, the Bahrein Petroleum Company in anticipation of what would be acceptable to the British government and stood ready to begin work on the concession. In April 1929, EGS was still trying to get approval for the transfer of the concession to SOCAL from the British Colonial Office. In an interdepartmental conference held in the Colonial Office on June 7, 1929, representatives of the British government prepared arguments to present to EGS that either their concession had lapsed, or that the request for an extension was without merit. The conference then compiled a list of stipulations beneficial to the British government under which they would be willing to recommend to the Sheikh to extend the licence. The company was to be registered in Britain, the chairman, managing director, local general manager and the whole local staff with some exceptions were to be British. The Colonial office was delighted when in a July 19, 1929 meeting EGS did not dispute the right of the British government to impose restrictions and it was not necessary to make use of the prepared arguments. The American reply was essentially a refusal of all conditions. They opposed most strongly lack of control over local personnel in charge.
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EGS paid the 10,000 rupee annual royalty on December 2, 1929.
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The concession was formally assigned to the Bahrein Petroleum Company Ltd on August 1, 1930. BAPCO applied for the prospecting licence to run for 2 years from December 2, 1930.
The following 4 conditions were eventually imposed :
  1. BAPCo had to be a British Company registered in Canada, but maintain an office in Great Britain run by a British citizen as a conduit for communication between the company and the British government.
  2. 1/5 directors had to be a British citizen, appointed in coordination with the British government, with the salary paid by the company.
  3. The company had to maintain a Chief Local Representative, approved by the British government, who would be authorized to deal with the local population, local authorities and through the British Political Agent in Bahrein with the Sheikh. Frank Holmes was appointed to the position for the first 5 years.
  4. As many employees as is consistent with the efficient operation of the business had to be either British or Bahreini citizens.