Identifier
Created
Classification
Origin
04MANAMA1422
2004-09-15 09:18:00
CONFIDENTIAL
Embassy Manama
Cable title:  

MINISTER OF OIL DISCUSSES PETROLEUM SECTOR WITH

Tags:  PREL ENRG EPET BA PROG 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 001422 

SIPDIS

STATE FOR NEA/ARPI, EB

E.O. 12958: DECL: 09/13/2014
TAGS: PREL ENRG EPET BA PROG
SUBJECT: MINISTER OF OIL DISCUSSES PETROLEUM SECTOR WITH
AMBASSADOR

REF: STATE 166919

Classified by Ambassador William T. Monroe for reasons 1.4
(b) and (d).

-------
Summary
-------

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 001422

SIPDIS

STATE FOR NEA/ARPI, EB

E.O. 12958: DECL: 09/13/2014
TAGS: PREL ENRG EPET BA PROG
SUBJECT: MINISTER OF OIL DISCUSSES PETROLEUM SECTOR WITH
AMBASSADOR

REF: STATE 166919

Classified by Ambassador William T. Monroe for reasons 1.4
(b) and (d).

--------------
Summary
--------------


1. (C) Minister of Oil Isa bin Ali Al Khalifa told the
Ambassador September 6 that U.S. companies have participated
successfully in the development of Bahrain's petroleum and
petrochemicals sector, and he looks forward to continued
cooperation with the U.S. He stated that his primary concern
is finding a steady supply of natural gas, and noted that
Qatar is the natural source. As discussions with Qatar have
become stuck because of Saudi Arabia's lack of clarity on
whether a pipeline can pass through Saudi territory, a
Bahraini official visited Iran to discuss the supply of gas.
The Ambassador responded that the United States would be
greatly concerned about a deal with Iran and recommended that
Bahrain focus on the Qatar option. The Minister said that
Saudi Arabia intends to expand oil production in the Abu
Saafa oil field from 140 thousand to 300 thousand barrels per
day, and he hopes the Saudis continue to donate their share
of the field's production to Bahrain. End Summary.

--------------
U.S. Firms Welcome in Bahrain
--------------


2. (C) Minister of Oil Isa bin Ali Al Khalifa welcomed the
Ambassador to Bahrain during their September 6 introductory
meeting and explained that Bahrain has a long track record of
successful cooperation with American companies in the
petroleum sector. He noted that the Ministry had recently
invited four American firms - Chevron Phillips Chemical, Dow
Chemicals, Huntsman, and ABB Lummus - out of nine companies
total to submit proposals for the development of a new $1.4
billion naptha cracker. The timetable for the project is
still not clear, but it likely will proceed because the GOB
has calculated that the internal rate of return on the
investment would be 16 percent and the plant would employ
many Bahrainis.

--------------
Searching for Steady Supply of Gas
--------------


3. (C) He stated that his main concern is access to a steady

supply of natural gas. The Ambassador noted that he had met
with Exxon concerning the proposed pipeline project from
Qatar. Al Khalifa said that the Emir of Qatar had told him
that Qatar wants to proceed with the project but Saudi Arabia
had caused it to get bogged down. The Qatar plan was to
build a pipeline from Qatar to Bahrain, and onward to Kuwait
through Saudi territory. However, the Saudi government has
not yet signaled whether this would be acceptable.


4. (C) The Minister said that Crown Prince Salman bin Hamad
Al Khalifa had taken possession of the gas issue and had
formed a committee to explore Bahrain's options. An Under
Secretary from the Ministry of Finance and National Economy

SIPDIS
visited Iran to discuss the supply of gas. The Ambassador
interjected that the United States would be greatly concerned
with a Bahraini gas deal with Iran, and strongly recommended
that Bahrain conclude a deal with Qatar. The Minister said
that Bahrain's intent was to show the Qataris that it had
other options, and noted that perhaps Saudi Arabia or Iraq
could supply gas to Bahrain. He commented, however, that
Qatar was the most logical solution.


5. (C) The Minister stated that Bahrain has domestic
supplies of natural gas to satisfy current consumption but
needs access to additional supply to meet future demand. He
said that the national economy and industries must grow and
the lack of gas is already acting as a constraint on
expansion. Bahrain could take advantage of high
international prices for urea and methanol if it had
sufficient supplies of gas to expand its petrochemical
industry. He noted that ALBA, Bahrain's aluminum
manufacturer, had signed an agreement with U.S.-firm ALCOA in
2003 to produce aluminum jointly on a sixth production line,
but that deal was in jeopardy because Bahrain did not have
enough gas to support the sixth line. He indicated that
Bahrain had drilled for gas in Bahraini territorial waters
near the border with Qatar but had come up empty. Chevron
and Petronas are scheduled to drill additional test holes in
the vicinity of Hawar Island.

--------------
Saudi Generosity with Oil
--------------


6. (C) Regarding oil, Al Khalifa said that though Saudi
Arabia and Bahrain officially share the 140,000 barrels per
day produced in the Abu Saafa field, Saudi Arabia donates its
half to Bahrain. The Saudis had announced previously their
intent to invest in the field to expand production to 300,000
barrels per day, and the Minister hoped that Saudi Arabia
would continue to donate its share to Bahrain, saying the
Saudis have been very generous. He indicated that Bahrain
both benefits and loses from high international oil prices.
While Bahrain exports oil products, it purchases crude to
process in its refinery. The net impact of high
international oil prices on Bahrain's economy is positive,
but there are costs as well.

MONROE