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Robust long-term strategy in place for Bahrain's oil major.

THE year 2010 marked a 360 degree change to the annual strategic planning process of Bapco. A project was launched in September 2010 with the objective of developing a robust long term strategy for Bapco and setting a clear direction for the entire organisation. This involved a complete review and update of the global and regional market trends; the company's strengths, weaknesses, opportunities, threats and areas of competitive or operational opportunity on its strategy, resources, process and organisation; and the political, economical, social and technological factors that could impact the business.

Such strategic awareness is crucial for the development of effective strategies to make the major and challenging strategic shifts that the company is determined to achieve.

The strategies were developed after a series of discussions between the consultant Arthur D Little and all the Bapco Strategic Planning Council members. These were followed by a series of workshops to discuss possible projects, future targets and business objectives.

A 15-year strategy roadmap was developed with a focus on the 6-year strategy from 2011 to 2017.

The five strategic priorities for 2010 continue to define the framework and the strategic drives for Bapco in the years to come. Under these five strategic priorities, 16 initiatives were developed for the years 2011-2017.

Bapco's five corporate priority outputs for 2010 were increased profitability; improved cost efficiency and cost competitiveness; image excellence; integrated OEMS implementation; skilled, motivated, and productive resources attraction and retention.

The strategy was then translated into plans and action steps which give staff full accountability and buy-in for achievement of their goals.

Bapco received OSHAS 18001:2007 recertification

As part of the strategic framework, an accountability framework, and a performance measurement system were also developed. The performance measurement system entails the development of outcome-based performance indicators and the establishment of targets to be reported by scorecards. There will be a scorecard for the corporate as well as one per division and each will be assigned an owner.

Bapco plans to enhance its strategic position in the region. With this end state in mind, strategic objectives and initiatives were developed and accordingly key performance indicators that indicate achievement of the long term goals and targets were agreed.

The company wants its strategic plan to be a living document and that it provides direction all the way to the frontline staff and to align its corporate priorities from top to bottom.

MAJOR REFINERY PROJECTS Refinery Master Plan Project: The year 2007 marked the successful completion of one of the largest projects in Bapco's history, the construction of the low sulphur diesel production (LSDP) project. This project elevated Bapco's market position and paved for another strategic project, the lube base oil production project. The LSDP project produces ultra low sulphur diesel, the highest value product. However, the world continues to demand other better quality products and the lately announced product quality changes will significantly impact fuel oil. The GCC announced a required shift, in the near future for the local markets, to a higher quality gasoline. Bapco produces large volumes of high sulphur fuel oil and very low quality gasoline. The world will demand very low sulphur fuel oil and gasoline specifications. Bapco needs to address these two main products in order to stay competitive and enhance its strategic position. Bapco awarded Chevron Lummus Global (CLG), the refinery master plan study for the Bapco refinery with the objective to develop an optimum refinery configuration which will place Bapco among the most competitive and profitable refineries in the Asia-Pacific / Middle East region.

The primary objective for the refinery master plan is to improve the product slate by upgrading the residue to improve the gross margin to stay competitive under a wide range of feed and product prices and market situation. The refinery also aims to meet all the applicable environmental regulations and improve energy efficiency to stay competitive. The feasibility study was concluded in 2010 and results were presented to the Bapco Board of Directors on the November 23, 2010. The Bapco board approved the next steps required to develop the project further. The preliminary economics of the project reflect its vital importance in enabling the continued operation of the refinery, and the future prosperity of Bapco as a major international export refinery.

Bapco ... turning on the valves of prosperity

The project will provide an excellent opportunity to develop Bahraini engineers, technicians and operators as they participate in the various phases of the project stages from inception until completion and subsequent commissioning of the facilities.

Bapco plans to conduct several studies in 2011 as part of the refinery master plan project. The studies approved for 2011 are due diligence study, financing options study, unit definition study and decision risk analysis study. These studies will be followed by technology selection.

Bahrain Liquefied Natural Gas (LNG) Terminal Project: Bahrain has been self-sufficient in energy for many years. However, given the rapidly growing gas demand from the power, desalination and industrial sectors, Bahrain has taken strategic decisions with regard to its long term energy policy and decided to consider importing natural gas in addition to the development of new domestic gas resources to ensure its primary energy supply.

While Bahrain does not face an immediate crisis, it is prudent to launch now a process for evaluating the potential of Liquefied Natural Gas (LNG) imports to meet a portion of the country's energy requirements. Bahrain has also reviewed the amount of gas that it would like to keep as a strategic reserve as an insurance policy in case of future gas supply shortages.

The options for how this will be achieved were studied throughout 2010 resulting in the development of the LNG Project. A team was formed comprising technical staff from Noga, Nogaholding and Bapco to develop the LNG import project. Nogaholding, has nominated Bapco as the technical consultant for this project.

Fourteen international contracting companies have been selected as potential partners and were invited to tender for the project which includes options to construct an LNG terminal, operate the terminal and provide a supply of LNG to fuel Bahrain's major industries. The proposals will be evaluated in the second quarter of 2011.

This LNG import facility shall be located on the north-eastern side of Bahrain, near the existing Sheikh Khalifa bin Salman Port. The business objective of the Bahrain LNG terminal project is to supplement the indigenous gas supply, to meet peak demand and major industrial growth requirements.

It has been decided to build and operate an LNG import facility, the Bahrain LNG Terminal, to cater for a portion of the country's future energy to be in operation by Q4 2014.

STRUCTURED SCREENING STUDY A structured screening study to identify potential companies for acquisition and investment was developed and awarded to Dun and Bradstreet.

A giant drill of Bapco at work

The business development group worked closely with the Consultant to identify a range of suitable international target companies which will allow Bapco to diversify into new business opportunities, increase international exposure and increase career opportunities for Bahrainis in both local and international markets.

An evaluation process was developed and three of the most interesting companies were initially selected for detailed study. These business opportunities will be presented to the Board in 2011. The Top100 opportunities will be evaluated throughout 2011.

EXPLORATION AND DEVELOPMENT The activities of the year 2010 were very intensive and concentrated mainly in the offshore blocks 2 and 4. Geological and geophysical studies were also completed in the offshore Blocks 1 and 3. New ventures initiatives outside Bahrain have been short-listed with special focus on the Middle East region. This includes initiative for gas import to Bahrain.

The major activities of the Exploration and Development Department during the year 2010 were as follows:

* Exploration activities related Offshore Block-4; * Exploration activities related Offshore Block-3; * Exploration activities related Offshore Block-2; * Exploration activities related Offshore Block-1; and * New ventures outside Bahrain.

Exploration activities of offshore Block-4: Occidental Bahrain (American Oil Company) has begun the first exploration phase of three-year effective February 24, 2009 in offshore block-4. Based on geological and geophysical studies particularly seismic reprocessing , Oxy and Bapco team firmed up one drillable prospect in Block-4. Oxy drilled its first exploratory well in January 2010 using the services of Nobel Drilling Company. The well has resulted in gas shows in Jurassic Hanifa formation with non-commercial quantity.

New seismic data acquisition has also been carried out in block 4. Oxy has acquired 3D seismic data of 212 sq km in South Western Bahrain offshore area using BGP seismic crew; a Chinese geophysical company. This project was successfully completed in a short time. This was achieved with excellent cooperation with different concerned government agencies.

Exploration activities of offshore Block-3: After completion of geological and geophysical study of the offshore block 3, Occidental Bahrain has begun the first exploration phase of three year effective February 24, 2009 in offshore block-3. Seismic data reprocessing work was carried out for enhancing the quality of seismic data and better imaging. Geochemical survey, basin modelling and seismic sequence studies were also taken up for valuable inputs in identifying hydrocarbon potential areas.

Exploration cctivities of offshore Block-2: PTTEP (Thai company) has begun the first exploration phase of three year effective February 25, 2008 in offshore block-2. Geological, well log correlation, seismic sequence study, basin modelling and geophysical studies were carried out by PTTEP. Seismic data reprocessing work was carried out for enhancing the quality of data and for better imaging. PTTEP has acquired new 2D seismic data of 600 km in Fasht Al Jarim and the surrounding area using the crew of BGP, a Chinese geophysical company. Seismic interpretation was carried out using new and re-processed 2D data. PTTEP and Bapco have jointly conducted geological and geophysical data analysis and identified a prospect in South Jarim area in Block-2. PTTEP is planning to drill its well commitment during 2011. A six months extension period was granted to PTTEP to complete their work programme of the first exploration phase.

Exploration activities of offshore Block-1: After completion of geological and geophysical study of the offshore block 1, Occidental Bahrain has begun the first exploration phase of three year effective April 4, 2010. Seismic data reprocessing work was carried out for enhancing the quality of data and better imaging. Geochemical survey, basin modelling and seismic sequence studies were also taken up for valuable inputs in identifying hydrocarbon potential areas. Based on the geological and geophysical studies, Oxy and Bapco team identified a number of prospects in Block-1. Oxy is planning to drill an exploratory well in 2011.

New ventures outside Bahrain: Upstream exploration and production sharing opportunities outside Bahrain has been short listed with special focus on the Middle East Region. Feasibility reviews have also been carried out to participate in various exploration bid rounds and farm in opportunity with IOCs. This include gas import project to Bahrain.

LUBE BASE OIL PLANT PROJECT A very attractive business opportunity conceived early in the past decade is now taking shape at the refinery as LBOP project nears completion. The LBOP project will produce Very High Viscosity Index (VHVI), Group III Lubricant Base Oils that are in increasing demand in Europe and North America to meet the next generation of automotive lubricant performance and environmental standards.

Bapco has gone into joint venture with Oil and Gas Holding Company (a subsidiary of nogaholding) Bahrain and Neste Oil of Finland to build this plant and associated export facilities at its refinery in Sitra, Bahrain. While Bapco will be operating and maintaining the plant on behalf of JV, Neste Oil will be marketing the products from this facility. JV partners have now established the Bahrain Lube Base Oil Company (BLBOC) to manage and operate the joint venture.

As at the end of 2010, the project is more than 96 per cent complete. Construction activities are in full swing to make the plant and product storage and export facilities ready for commissioning by the second quarter of 2011. Operations team is gearing up for the start up of the new facilities while joint venture implementation teams are busy finalising the business infrastructure essential to meet the challenges of the long term operation of this new joint venture.

All operating staff assigned to the new LBOP has successfully completed their in house class room and process simulator training. They also attended on site CLG LBO technology and operating training. They also attended an orientation to Neste Jacobs distillation technology by the end of November 2010.

Assigned LBOP Operation specialist, head operators, control room operators and LSDP shift supervisors have attended training in a similar unit at Neste Oil Porvoo refinery.

ONSHORE DEEP GAS PROJECT The two bidders Oxy and Canadian Natural Resources (CNR) from the first bid round in 2009 were requested to submit commercial bids on July 15, 2010 based on a pre-defined technical work programme. After detailed bid evaluation by an in-house team and independent consultants, Oxy was ranked first in overall technical and commercial bid offer.

On November 30, 2010, a Framework Agreement was signed with Occidental Petroleum to start the official negotiations to finalise deep gas EPSA. A number of meetings have been held with Oxy to agree on various details of EPSA. These negotiations are ongoing and expected to be completed in early February 2011 with the objective to sign the deep gas EPSA in mid-February.

GAS DISTRIBUTION AND SALES Tubli sewage and effluent plant: As part of Bapco's obligations to supply the required natural gas to the kingdom's industries, Bapco has successfully commissioned a new 4-inch gas pipeline with a new gas reducing station and started feeding Khuff gas to Tubli sewage and effluent plant in March 2010.

Switch gas supply to South Alba distribution point from Khuff gas to residue gas: In order to maximise the use of residue gas and minimise flared gas at the Banagas end, Bapco in cooperation with Tatweer Petroleum has carried out modifications at Alba distribution point and successfully switched gas supply to south Alba industrial area from Khuff gas to Residue gas in May 2010.

Commissioning of Al-Dur IWPP facilities: In an effort to provide the energy required to meet the ever increasing demand for power supply, Bapco has commissioned the new Al-Dur distribution point (DDP), 2-20 inch pipelines from field area and two 20 inch pipelines from DDP along with a new Dur metering station during May 2010. These facilities are to supply natural gas to new 4000 MW Al-Dur independent water and power plant located at Al Dur south east of the kingdom.

CERTIFICATIONS Bapco receives OSHAS 18001:2007 re-certification: Occupational Health and Safety Assessment Series (OHSAS 18001) is an internationally recognised system aimed to assess an organisations' occupational health and safety risks and gives requirements to continually improve an organisations' performance. Bapco has been registered to OHSAS 18001 by Det Norske Veritas (DNV) -- Middle East registration body since November 2003. The certification was valid for three years and periodically audited on a bi-annual basis. The second recertification audit took place from in November on all Bapco Operations and the company was awarded a recertification of OHSAS 18001:2007. The periodic audits will take place starting from next April and the organisation will undergo audits every six months in compliance with OHSAS18001:2007 clauses.

DSO9000:2008 recertification with addition of marketing: In January 2009, the BSi recommended the transition of certification to ISO9001:2008 standard and the continuation of the company registration.

ISO 9001:2008 is the new version of ISO 9001:2000 and Bapco needed to be in full compliance with the new standard by end of 2009. BSi audited the QMS based on the new standard requirements and the outcome was satisfactory. Some observations relating to the new ISO 9001:2008 requirements, were raised for implementation and review by the BSi in their next visit in October 2009.

In October 2009, the BSi announced the inclusion of Marketing Division in the Quality Management System (QMS) Scope Certification.

The October 2009 assessment visit was carried out by BSi from the October 11 to 13, 2009. This visit was planned as a continuous assessment visit and the initial assessment on Marketing Division in order to be included under the scope of the QMS certification. The BSi auditors visited the areas scheduled for the audit including marketing division.

The expansion of certification to include the marketing division was a commendable team effort with every employee contributing to the successful implementation of the quality management system.

IT STRATEGY STUDY An IT Strategy for Bapco for the next 5 to 10 years has been completed, based on company strategic objectives and IT technology trends in the oil and gas sector. The study recommended to focus on implementation of six major strategic business programs, namely: reliability excellent; integrated electronic procurement; talent management; financial reporting and governance; knowledge management; business efficiency; IT infrastructure and business application productivity improvement. These programmes will be further scoped and converted to IT projects which would then be planned, prioritised, resourced and added to the overall IT projects portfolio for execution.

Empac Enterprise Asset Management System Replacement: Work is already under way to select a replacement system for the current Empac (Enterprise Asset Management System) which has been in operation since 1985 and will be de-supported by end 2012. This integrated system is used company-wide for asset management, work order management, procurement, inventory management, and contract management. Bapco does not only seek a 'replacement in kind' only, but we are also interested in leading practices and advances in the technology as well as the business processes currently in offer. A number of vendors, who offer world leading packages in the EAM area, were invited for demonstrations and users discussions and reviews. These packages are now being evaluated in details, leading to the selection of the suitable replacement system. An implementation team will then be formed for deployment.

EMARKETPLACE INITIATIVE Bapco is continuing to lead the Bahrain local eMarketplace initiative in support of government's 2030 Vision, with a great deal of support from Tamkeen, Bahrain Tender Board and the other major participating companies: Alba, Asry, Banagas, Bas, Batelco, Garmco, GPIC and Gulf Air.

The initiative will establish a Bahrain eProcurement community to provide sustainable opportunities and support for Bahrain small and medium sized business, in order to extend skills and experience and promote employment and economic development within Bahrain. Meetings with CEOs of the respective companies have been very positive.

During 2010, PricewaterhouseCoopers was engaged as consultants and a strategy for development has been prepared. This includes the creation of a Bahrain Industry Commercial Forum (BICF) to provide governance in development of regional standards and sharing of good practice -- and the implementation of collaborative projects, including common eBusiness solutions.

Workshops are planned to ratify the BICF Charter, confirm the business strategy and operational models and approve the architecture for the forum and eBusiness solutions.

The BICF will be established. The development of common policies, standards and eBusiness solutions, including establishment of a Bahrain Local eMarketplace, will be rolled out during 2011.

QUALITY AND COMPLIANCE The first phase of a project to improve the compliance processes for the integrated EHSQ (environment, health, safety and quality) audits successfully completed the configuration and installation of two modules for audit management and corrective and preventive actions (CAPA).

These modules were provided through MetricStream, a recognised leader in the provision of IT systems in the governance, risk and compliance area. The second phase to cover the tracking of incidents and observations is now under way.

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Publication:Oil & Gas News
Article Type:Company overview
Geographic Code:7BAHR
Date:Feb 28, 2011
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