NATIONAL OIL AND GAS OFFICIAL HIGHLIGHTS GROWING

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 001750

SIPDIS

SIPDIS

NEA/ARP, EB/ESC/IEC/EPC FOR GLENN GRIFFIN
COMMERCE FOR TYLER HOFFMAN

E.O. 12958: DECL: 10/01/2016
TAGS: ENRG EPET ETRD ECON BA REGION ECTRD
SUBJECT: NATIONAL OIL AND GAS OFFICIAL HIGHLIGHTS GROWING
GAS DEMAND

REF: 05 MANAMA 1601

Classified By: Ambassador William T. Monroe, reasons 1.4 (b) and (d)

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SUMMARY
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1. (C) National Oil and Gas Authority (NOGA) Chairman Dr.
Abdul Hussain Ali Mirza September 28 told the Ambassador that
a plan to import gas from Qatar (reftel) had been delayed and
that if a deal is concluded, Qatari gas would not be expected
to begin flowing to Bahrain until 2011. He said Iran is
eager to supply gas to Bahrain, but the GOB has thus far
declined. The GOB is exploring measures to increase domestic
gas production. Once completed, the GCC power grid could
free-up some gas currently used for power generation and
other industrial processes. Despite an increasing gas
demand, Mirza noted that the GOB continues to heavily
subsidize domestic fuel to the tune of $212 million per year.
End Summary.

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PIPELINE PLAN OUT OF GAS
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2. (SBU) NOGA Chairman Dr. Abdul Hussain Ali Mirza told the
Ambassador September 28 that Bahrain's plan to import gas
from Qatar (reftel) had been delayed following a Qatari
moratorium on further gas exports until the end of 2007.
Mirza explained that Bahrain and Qatar had failed to come to
terms before Qatar implemented the moratorium, which he said
had been instituted in response to an abundance of new
projects requiring gas in Qatar. If a deal can be reached,
and assuming pipeline construction starts in 2008, Qatari gas
would not begin flowing to Bahrain until 2011.

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IRANIAN GAS REBUFFED, DOMESTIC ALTERNATIVES SOUGHT
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3. C) Mirza stated that Bahrain was currently able to meet
its needs with domestic gas production, but that growing
demand meant that Bahrain would need to expand its gas
supply. (Note: Bahrain currently has a domestic gas
production level of one billion cubic feet per day and does
not import gas. Natural gas reserves stand at roughly 3.25
trillion cubic feet, much of which is associated gas from the
Awali field. End Note.) Mirza noted that Iran was eager to
supply gas to Bahrain, but said the GOB has thus far resisted
Iran's overtures in anticipation of USG disapproval.


4. (SBU) Mirza said his first priority was gas exploration.
He also cited a need for Bahrain to expand its liquefied
natural gas storage capacity and strategic reserves and said
a GOB-commissioned study suggested that the Bahrain Petroleum
Company (BAPCO) should drill additional on-shore wells to
help meet demand through 2011. He added that new technology
could be leveraged to extend the productivity of existing
wells.


5. (C) He said Russian companies showcasing technology that
revitalizes old wells have offered to work Bahrain. In
addition, Chevron and Shell may join with Total to drill new
wells below fifteen thousand feet in an attempt to exploit
previously untapped reserves. Six off-shore blocks have been
designated for exploration. Mirza, who also serves as
chairman of the Bahrain Tender Board, added that interested
companies would be brought in through the tendering process.


6. (SBU) He said that a GOB committee comprised of the NOGA,
the Economic Development Board, the Ministry of Industry and
Commerce and BAPCO was also currently evaluating additional
measures to maximize Bahrain's gas supply. The GCC power
grid, which is due to be completed by 2010, could serve as an
additional source of power to meet part of the demand now
being met by gas-fired power generation plants and other
industrial processes. Fuel oil is also being evaluated as a
gas alternative for industrial use.

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DOMESTIC SUBSIDIES SUBSTANTIAL, PROBLEMATIC
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7. (C) Mirza noted that the GOB had not adjusted consumer gas
prices since 1983 and that these prices currently amounted to
an 80 million dinar (approximately USD 212 million) annual

MANAMA 00001750 002 OF 002


subsidy. He added that the current price of diesel, 70 fils
per liter (approximately 71 cents per gallon) was so low that
diesel smuggling from Bahrain had become a problem.


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