11-05-04

There will be a major shift in product flow around the globe and the world will face substantial challenge in the economies of refining due to the almost total embargo on new refineries in the US and Europe, Mohammed Shaikh Saleh Ali, president and managing director of Bahrain Petroleum Company (Bapco), has said.

Addressing the opening session of the 12th Annual Middle East Petroleum and Gas Conference (MEPGC-04), he also noted that the industry can deal with product specifications, "but excessively strict rules on emissions and waste and water control pose a major challenge to an already economically weak refining industry."

Commenting on the status of refining, he said there is a growing need for additional refining capacity to meet the increasing world demand for oil, particularly due the demands by the developing Asian economies, especially China and India. Furthermore, there will be a major shift in product flow around the globe and a substantial challenge in the economies of refining due to the almost embargo on new refineries in the US and Europe.

He was delivering a keynote address at the conference "Middle East Oil and Global Energy Security: Rising to the Challenge", under the patronage of the Minister for Oil, Shaikh Isa bin Ali Al Khalifa.

The experts analysed the various aspects of the petroleum and gas industry, including the world economy and the future of oil as the premier energy source. Despite the growing demand and a bigger ready market, the industry is facing several challenges, he said, because firstly, "we have a finite and limited resource, and there is not yet any viable alternative replacement resource."

At the moment, we seem to be in balance "that is the depletion or usage of the resource seems to be in equilibrium with the finding of new resource base" and this equilibrium or the perception of it is very important in maintaining price stability, he said pointing out the price of oil has hit the $ 40 per barrel, the highest since the invasion of Kuwait in 1990, and the price could go even higher.

Due to the increasing worldwide demand for oil, the price will explode, but the real "challenge is how to find new conventional or unconventional resource base and increase recovery from mature or developing reservoirs," he said. Mr Ali said that the latter is a major problem Bahrain faced, and successfully tackled through a combination of technical and managerial innovation in the past two decades.

"Secondly, we have the challenge of new environmental rules and regulations on emissions and product specifications, mostly in the downstream area of the industry," he said adding that with week or no-existent refining margins, the industry is being asked to put huge investments that have no direct economic returns.

The excessively strict environmental rules have resulted in creating a stagnant refining industry in the US and Western Europe. And, all around the world, the downstream industry -- refining, petrochemicals and shipping -- is facing this challenge. Ittries to comply with these new environmental regulations while still struggling the industry economically viable," he said.
The conference aims at discussing the strategic perspectives in energy security in the short tem, the impact of the political environment, investment opportunities in the upstream and downstream, the regional product trade outlook, future of oil suppliers in the inter-play between regional and global oil markets.

Source: Khaleej Times