Gateway to Arabia What Bahrain has in Store for the Process Industry

Editor: Dominik Stephan

The caravan moves on — while markets like China and India took the spotlight during the last years, the Middle East is about to tap into its industrial resources. Major plant projects boom in states like Bahrain. Now wonder that the country was able to attract companies like BASF, Siemens, DHL and many others …

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(Montage: PROCESS)

The air shimmers over the desert sands — no birds, no gusts of wind disturb the stillness. At 104° Fahrenheit, even lizards and scorpions seek cover beneath stones and in holes. Dust, sands and pebbles are all around. The only sign of life is the monotonous swaying of the pump jacks — a steady mechanical ballet. With each stroke a typical pump lifts between five and fifty liter of oil and water. In 2011, some 1.3 billion liters of crude where produced this way around the Persian Gulf — nearly one third of the world’s total production. But how long will the ‘black gold’ continue to spring in the desert?

“We Invest in Heads” – Structural Change at the Gulf

Whether or not ‘peak oil’, the point at which petroleum production declines despite rising demands, has already been reached or not, is vividly disputed. But the day will come. The gulf state Bahrain is already importing crude oil to feed the huge refineries that were built during the boom. Arabia is buzzing once again. Only this time it is not about Qur’an exegesis or regional disputes. It’s about the transformation of whole societies, away from being a sole producer of raw materials towards a knowledge based service and industrial society.

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The conditions are favorable: Low energy prices, flat taxes and a unique position halfway between the ‘Old World’ and the shooting stars of Asia. “We now invest in the heads of our people”, explains Kamal bin Ahmed, Minister for Transportation and CE of the Bahrain Economic Development Board. The country is currently spending huge sums on education, infrastructure and healthcare.

Oil Dollars Help to Build up Infrastructure for Future Development

“Already when Bahrain discovered oil in 1930, we used the profits to build up our infrastructure.” These investments helped to close the gap to the global markets and attract foreign investors alike. “No corporate tax. No VAT. But the best educated workers in the whole region”, bin Ahmed sums up the advantages of his homeland. And there’s more: A foreign investor in Bahrain does not need a local joint venture partner. His product, nevertheless, can be 100 % Bahraini and thus be traded freely in the states of the Gulf Cooperation Council (GCC).

Saudi Arabia, the region’s biggest market is just half an hour away via the 25 kilometer King Fahd Causeway. Next-door projects like the Sadara JV, one of the largest petrochemical projects, offer excellent perspectives: The region needs engineers, project managers and chemists alike. Also pipings, fittings and automation are in high demand. Polymer and plastic manufacturers need a whole range of admixtures and catalysts. Consequently, the world’s largest manufacturer of chemicals BASF established a production for additives in Bahrain.

An Oasis for Investment – The Bahrain International Investment Park

On-site at the Bahrain International Investment Park (BIIP) — here, in the vicinity of the capital of Manama, also Siemens, Lauscha Fibers, Kraft Foods and Matrikon have built production sites. “Around 80 % of the park’s 247 hectares have already been allocated”, Gerry Sharkey, Project Director of the Bahrain International Investment Park, explains. “We want to see more high qualified Bahraini and foreign companies.”

While dust and haze blur the horizon, an AC provides a comfortable freshness in the new BASF facility. Palm trees swing gently in front of the windows, while the wind blows fine sand against the industrial plants outside. Gordian Schilling, BASF’s Managing Director in Bahrain, is relaxed: Half a year ago, the company started manufacturing polymer additives for the plastics industry at the BIIP.

Going Deeper into the Petrochemical Value Chain

“We experienced no lost time accidents!” Schilling states right away — “Thus, we were able to keep all schedules!” Now BASF wants to produce up to 16,000 tons of antioxidants per year in Bahrain, none of which will remain in the country. These additives are primarily targeted for the regional petrochemical industry. Whenever an oil company decides to export enhanced value products like plastics and basic chemicals, BASF will be to the fore. Fast, flexible and close to the customer: Regional production has cut the lead times to the market by half, Schilling says. Cross-linked across the value chain, BASF profits directly from the transformation process in the Gulf region.

The production from imported raw materials is only a first step. “We already co-operate with the King Fahd University in Saudi Arabia. In the near future we will be able to provide local solutions for regional sales and distribution as well as services directly for and with the customer.” Bahrain could become a stepping stone for the chemical giant.

5,000 Years History Between East and West – Cosmopolitanism is a Tradition

Geographically Bahrain is ideally positioned: Halfway between Europe and Asia, the kingdom is also the Gate to the Persian Gulf. Not for nothing the world’s biggest logistics company DHL has chosen Bahrain as one of its global hubs. Also Holger Tillmann, Deputy Head of Mission of the German Embassy, confirms: “Bahrain is the ideal hub.” Being an island nation, the country has always welcomed merchant sailors and foreigners from different cultures. Archaeologists found traces of trade with China even in the country’s early history. Bahrain's liberal and open minded character is a direct consequence of this history, Tillmann believes — and a welcome change in the region.

In Ali Baba’s Treasure Cave

Will BASF’s Gordion Schilling not only mix antioxidants but also develop new products in his lab in a few years? “Why not?”, says Khalid Al Ameen, Member of the Board of Tankeem, an organization that promotes businesses in Bahrain: Each year, Tankeem spends US $ 49 million – more than half of its total budget – to promote universities in the country. If one day the oil wells run dry, ideas shall flow instead.

International investors looking for more than just a tax exile with cheap energy costs are a crucial part of these plans. And why not? An investment friendly atmosphere, acceptance of technology, an open–minded society and a high standard of living are not for granted, even in the wealthy Gulf states. If that sounds like a tale from the ‘Arabian Nights’, wait till you hear of the US $ 1.4 trillion market that is the GCC — are you feeling like Ali Baba yet? But do not be afraid of the ‘40 Robbers’ — Bahrain is a safe and comparatively stable country. While protests in the country made the headlines in 2012, the situation has gone pretty much back to normal. “Do not forget we are a young democracy”, Minister Kamal, who can be held responsible by both the king and the parliament, explains. “Some people have to learn what to do with their freedom.”

The atmosphere of pioneering can be felt throughout the country. While merchants in the Souks exchange goods and stories all night long, office windows in the skyscrapers are lighted. The glow of the cities shines out into the desert, where the oil pumps continue their monotonous nodding. Even without a magic lantern, the kingdom at the Gulf opens fairytale-like perspectives.

* The author is an editor for PROCESS worldwide.