Bahrain Mirror (Exclusive): Between the picture of a tight oil sample published by the Bahrain News Agency (BNA) on April 2, 2018 with the following headline: "HH the Prime Minister receives a sample of the first production of the oil discovery" and the actual date of the oil discovery, there is a period of over six months. The photo also shows a Bapco certificate, offered with a bottle of tight oil sample to Prime Minister Khalifa bin Salman Al Khalifa, which reads "Sample of the Bahrain Field discovered in September 2017."

What does that mean?

It means that the Supreme Committee for Natural Resources and Economic Security's announcement, headed by Crown Prince Salman bin Hamad Al Khalifa, of the "discovery of the largest oil field in the history of Bahrain" came about six months after the actual discovery on the ground.

In fact, there is nothing new about this observation. Oil Minister Mohammed bin Khalifa Al Khalifa had said in his speech during the opening session of the 13th Middle East Conference and Exhibition of the Geological Sciences (GEO 2018) held in Manama, Bahrain, (March 6th, 2018) that "Bahrain has discovered rock oil  in submerged areas". What is new; however, is that, in the same speech, he noted that the discovered oil is not commercial. "We discovered rock oil in submerged areas southeast of Bahrain; but these discoveries are not economically viable," he stressed.

These were the words of the Bahraini Minister of Oil uttered before the directors of 100 international companies representing 19 countries participating in the conference. What happened within three weeks that made the discovery viable?

The Oil Minister does not answer that. His new comments to Bahrain TV about the oil discovery announced by Crown Prince Salman bin Hamad Al Khalifa, in his capacity as chairman of the Supreme Committee for Natural Resources and Economic Security puts more layers on the obscurity of the matter rather than clarify it. He did not reveal any details except say that "the National Oil and Gas Authority is in the process of conducting geological surveys to determine the quantities that can be extracted, followed by studies on how to extract it using the best technology in light of which the cost of extraction will be determined, to have the extraction fields determined eventually."

The "cost of extraction" should be the secret key to addressing the truth of this discovery. It is the "Achilles heel" of Bahrain which should make us wary of going a long way in applauding it, as well as pose necessary questions as to whether the "largest discovery in the history of Bahrain since 1932 of tight rock oil, estimated at multiple times the size of the Bahrain field," is real or mere propaganda to cover the real economic problems in the country.

The statement announcing the discovery itself comprised in its last paragraph what should have been the first paragraph. It pointed out that "the Crown Prince gave directives to determine the viability of extractable quantities from this new field and devise plans to develop it over a period of time, taking into account the geological nature of the site and the cost of extraction."

However, what is the cost of extraction really? There is no fixed cost for oil extraction in general, both for rock and conventional oil. It is a general principle, as the cost of extraction may vary between one field and another within a single state, but there is a cost range.

The cost of extracting conventional oil in Arab Gulf countries, for instance, ranges from $5 to $15 per barrel. Economists estimate that the cost of extracting oil per barrel from the Bahrain Field is at $15 because of the old nature of the field. While the cost of extracting oil from Abu Saafa field drops to only $5 per barrel!

The extraction of rock oil causes a fourfold increase in cost. It ranges from $50 to $80 per barrel of rock oil. When we realize that the current selling price of a barrel of oil is $60 per barrel, we could comprehend why speaking of economic viability is always associated with the mention of rock oil.

The cost is based mainly on the geological nature of the land and the availability of suitable drilling kits and necessary infrastructure. For example, extraction of rock oil from very deep wells differs from shallow wells. The production cost of oil extracted from some wells in the United States does not exceed $40, while the cost of extraction from other wells in the United States itself reaches over $100.

Economists argue that the cost of producing shale oil will greatly exceed current costs, since the new areas discovered are "submerged." The extraction of oil from submerged water is more expensive due to the need for building a platform in the sea before drilling even begins. The offshore platforms service and transport of materials is more expensive than those on land. This allows us to understand why the Bahraini Minister of Oil in his speech during the "Geo 2018" conference said that "these discoveries are not economically viable."

The general equation, then, is the "non" economic cost of extracting shale oil, which exceeds the selling price. Shale oil exists in vast amounts compared to conventional oil in several countries in the region, such as Saudi Arabia, Iran, Libya and Algeria. However, none of these countries followed up these discoveries with explosive media announcements like the gulf kingdom did, since the officials of these countries are aware of the accompanying economic challenges. While large international companies are distancing themselves from investing in the development of rock oil production technologies given that they are not economically viable, the development of these technologies is limited to either small or independent companies.

So what's new in this regard that Bahrain could announce? We will leave that to the Oil Minister, Mohammed bin Khalifa Al Khalifa; to solve the mystery of the change in his statements within span of only three weeks. As for Crown Prince Salman bin Hamad Al Khalifa, he should solve his issue with the Oil Minister's statements.

Arabic Version