OIL MINISTER SAYS IRANIAN GAS TALKS ANNOUNCEMENT

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000419

SIPDIS

SIPDIS

NEA/ARP, EEB/ESC/IEC/EPC FOR GLENN GRIFFIN
COMMERCE FOR 4520/ITA/MAC/ONE/THOFFMAN

E.O. 12958: DECL: 05/06/2017
TAGS: ENRG EPET ETRD ECON BA REGION ECTRD
SUBJECT: OIL MINISTER SAYS IRANIAN GAS TALKS ANNOUNCEMENT
IS TACTIC AIMED AT QATAR

REF: MANAMA 1750

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

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SUMMARY
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1. (C) Minister of Oil and Gas Affairs Dr. Abdul Hussein Ali
Mirza confirmed to the Ambassador that the GOB is in talks to
import gas from Iran but claimed that there was no
expectation such a deal would materialize and that it is
merely a tactic to increase Bahrain's leverage in gas
negotiations with Qatar. Mirza also stated that Bahrain
needs to increase gas production from 1.2 to 1.7 million
cubic feet per day by 2010 in order to keep pace with growing
demand, which it will do. The GOB has pursued the
possibility of acquiring Saudi and Kuwaiti gas, without
success. The GOB has tendered four offshore blocks for oil
and gas exploration with hopes of signing a successful
agreement by year end. End Summary.

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IRANIAN TALKS TO STRENGTHEN HAND WITH QATAR
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2. (C) In an April 25 meeting with Minister of Oil and Gas
Affairs and National Oil and Gas Authority (NOGA) Chairman
Dr. Abdul Hussein Ali Mirza, the Ambassador expressed deep
concern over recent press reports that the GOB was in talks
with Iran to import gas. The U.S. would be strongly opposed
to such an agreement. The Ambassador noted that these
reports contradicted Mirza's assurances to him in September
2006 that despite Iranian eagerness to supply gas to Bahrain,
the GOB was resisting Iran's overtures in anticipation of USG
disapproval.


3. (C) Mirza acknowledged that the reports were true, but
claimed that there is no expectation the Iranian gas imports
would materialize. "Although they said they will supply us,
their offer has to be reviewed by their technical committee,
which could take two years or more. Everyone knows how the
Iranians are." Mirza explained that the motive in announcing
gas talks with Iran was to strengthen Bahrain's hand in
negotiations with Qatar. "Qatar needs to know that there are
others."

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EXPLORING ALL AVENUES
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4. (C) Mirza said Qatar had over-committed its gas supplies
and was currently studying the situation. However, Qatari
officials had assured the GOB that Bahrain would be the first
to receive a new commitment for gas once the Qatari study was
complete. Mirza added that the GOB had also approached KSA
officials regarding the possibility of importing Saudi gas,
but was told that Saudi Arabia had only enough supply to
support domestic consumption. He said overtures for Kuwaiti
gas had also not been productive. "Bahrain is a sovereign
state. We need to make sure we have tried every avenue.
Parliament will ask us what we have done."


5. (C) Mirza said Bahrain needs to increase gas production
from 1.2 to 1.7 million cubic feet per day by 2010 in order
to keep pace with growing demand, and anticipated that this
would be done by expanding domestic production. "This will
give us breathing room" until further supplies could be
identified, either from abroad or from new domestic fields.
Mirza said he had evaluated liquefied natural gas and fuel
oil, but that both appeared to be prohibitively expensive
alternatives. Mirza added that an integrated GCC power grid,
which is projected to link the six GCC states via a combined
electricity network by 2010, would ease Bahrain's gas supply
needs, allowing more gas to be allocated for industrial
needs. (Note: Bahrain's installed power generation capacity
remains barely ahead of current consumption. Bahrain will
invest an estimated $1 billion to generate an additional
1200MW planned by 2010 as part of a strategy to meet the five
percent annual increase in power demand.)

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NEW EXPLORATION BLOCKS ATTRACT WIDE INTEREST
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MANAMA 00000419 002 OF 002



6. (C) Mirza highlighted NOGA efforts to increase
transparency in its bids process, as evidenced in its recent
tendering of four offshore blocks for oil and gas
exploration. NOGA has established a website
(www.bahrainoffshorebid.com) to make up-to-date tender
information available to potential bidders. Some 66
companies had thus far expressed interest, including several
U.S. firms. Most data is now available on the website, but
companies interested in seeing seismic data could register to
obtain an appointment to review the data in person on NOGA's
premises after May 1.


7. (C) Mirza said that the area comprising six offshore
blocks previously designated for exploration (reftel) had
been repackaged as four larger blocks to make bidding more
attractive. He added that the GOB's new Exploration,
Production and Sharing Agreement had also been made more
attractive with the discontinuation of a formerly-required
signing bonus of $20 million. Bidding will close 30
September. The concession must be approved by parliament,
but Mirza anticipated that the concession would not be
challenged. He hoped to sign with the successful bidder
before year end.


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