Bahrain’s recent offshore shale oil discovery heralds the beginning of a new era for the country as it seeks to emerge as the region’s unlikely shale pioneer.

Before the discovery was announced in April, Bahrain’s reserves had dwindled to 125 million barrels. However, the country is placing much hope on the new discovery to boost its revenue, as 70% of its budget is generated from hydrocarbon exports.

Bahrain’s National Oil and Gas Authority said the kingdom’s major discovery has estimated reserves of 81.5 billion barrels (Bbbl) of tight oil in the Khalij al Bahrain Basin and deep gas reserves of 13.7 trillion cubic feet (Tcf).

The country was the first in the Gulf Cooperation Council where oil was discovered, back in 1932. Since that field was developed, there have been almost no new discoveries. Its reserves were held in just one field—the onshore Bahrain Field in the center of Bahrain. The field contains carbonate and sandstone reservoirs, ranging from pre-Khuff to Late Cretaceous. In total the field has 20 proven hydrocarbon-bearing reservoirs (16 oil and 4 non-associated gas). The Bahrain field went onstream in the 1930s and reached peak oil output in the early 1970s.

Bahrain also shares an offshore field called Abu Saafa with Saudi Arabia. The field produces an estimated 300,000 barrels per day (bbl/d), which is split 50:50, representing 82% of the country’s oil production. Bahrain also imports 230,000 bbl/d from Saudi Arabia via a pipeline, which is being expanded from Abqaiq via Dhahran to the Bahrain refinery in the Sitra region. The expansion will nearly double production capacity.

The recent discovery could be the game changer for Bahrain, which aims to become a major oil player. The ambition could be hard to achieve, given the technical knowhow required to tap such reserves, which sometimes also need regulatory changes.

While making the announcement, Energy Minister Shaikh Muhammad Al Khalifa said the discovery has some 80 Bbbl oil in place and 13.7 Tcf gas in place. Only a fraction will end up being classified as recoverable reserves once further appraisal work has been carried out. Nevertheless, it looks inevitable that Bahrain’s reserves are set for a dramatic upgrade.

“Oil in place of 80 billion barrels is based on a P50 resource estimate,” John Hornbrook, senior vice president ofDeGolyer and MacNaughton, said during a press conference. Hornbrook added that “the discovery breaks new ground for the Bahrain oil and gas industry using established technologies.”

Positive test well results have successfully demonstrated the productivity of the resource. Schlumberger, which performed the first test well drilling, added the Bahrain Petroleum Co. (Bapco) has already succeeded in flowing high quality oil from the wells during the testing and flow back phases. “Based on the core analysis carried out on several wells the formation could be classified at the edge of the conventional-unconventional type of plays,” a Schlumberger spokesperson said.

However, the crude may still prove costly to extract. Yahya Al Ansari, chief exploration geologist at Bapco, described the find as “a layer with moderate conventional reservoir properties on top of an organic-rich source rock.”

While the discovery is significant in size, more information is needed to establish how much of the resource is commercially recoverable and its classification would pose production challenges, said Tom Quinn, senior analyst, Middle East upstream, for Wood Mackenzie. “A tight reservoir means a low recovery factor and only a fraction of the 80+ billion barrels is likely to be recoverable. The oil will also be technically challenging and potentially high cost to develop,” Quinn said. “The unconventional nature of the discovery could also force the Bahrain authorities to offer more generous contract terms to international oil companies than they have in the past.”

While the extent of the discovery and its potential to boost the state exchequer is tremendous, the economic impact of the find will depend on how much of the estimated reserves are commercially viable to extract. Currently, industry experts estimate the average recovery rate for tight oil in North America is between 20% and 40%. Furthermore, Bahrain will need to deploy the latest technology and know-how to monetize the reserve; on a top of that, it will need high oil prices to make the discovery feasible.

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