Bahrain is to establish a BD151 million ($400 million) lube base oil manufacturing plant in joint venture with a Finnish company, it was revealed.

Oil and Gas Affairs Minister and chairman of National Oil and Gas Authority (Noga) and Bapco Dr Abdulhussain Mirza signed an agreement on the formation of the joint venture company with Neste Oil.

The new company will be 55 per cent owned by Noga Holding and 45 per cent by Neste Oil. Around 1,500 jobs are expected to be created during construction of the plant, which will produce lube base oil - the raw material for manufacturing lubricating oil.

The signing ceremony, at the NOGA office in Manama, was attended by Finnish ambassador Matti Lassila, Neste Oil executive vice-president Kimmo Rahkamo, chief financial officer Petri Pentti, members of a Neste Oil delegation and representatives of Noga Holding and Bapco's management.

Three companies submitted bids for the engineering, procurement and construction (EPC) contract to the Tender Board, Dr Mirza, who is also the Tender Board chairman, told the Gulf Daily News, our sister publication.

'The companies were Samsung (Korean), JGC (Japanese) and Technica (Spanish), and their contract value ranged from $314 million to $325 million,' he revealed.

'The additional costs include Bapco's labour overhead, administration and management expenses. The contract will be evaluated next month, and the EPC contract will be signed in August.'

Dr Mirza said it would then take 33 months for the construction of the plant at the refinery complex to be completed.

'More than 1,500 people will be employed during the construction period,' he revealed.

'The plant, which will be the largest of its kind in the Middle East, will produce the lube base oil which is the raw material for manufacturing lubricating oil. Neste Oil will market it around the world. We are thinking of building our own lubricating oil manufacturing plant in Bahrain in future.'

Dr Mirza described the signing ceremony as one of the momentous events in the history of the oil and gas sector of Bahrain.

'The meaning and spirit of this agreement goes well beyond building a unit here and selling products,' he added.

'We obviously expect this to be a commercial success. However, more importantly it is the start of a partnership, a sign of two parties having trust and confidence in each other.

'We value this partnership. We expect it to grow further into other potential projects benefiting both parties and both countries.'

The new environmental legislations that are being introduced around the world are having a profound effect on the automotive and fuels industry, said Dr Mirza.

'As a result of these new regulations, the demand is shifting from Group I lube oils to higher quality Group II and Group III lube oils,' he said.

'The overall structure of the lube oil and naturally the lube base oil industry is expected to change dramatically over the next five to 15 years. The future markets will be dominated by the high quality products.

'We are proud that in our new facilities we will be able to produce lube base oils suitable to make Group III lube oils - the products of the future.'

Once completed, the joint venture lube base oil facility will produce 8,600 barrels per day or more than 400,000 metric tonnes per year of Group III lube base oils.

'It will be one of the largest facilities of its kind in the world and one of the most competitive,' said Dr Mirza.

'This is a typical win/win type joint venture project where the contributions/strengths of the partners combined is greater than the sum of each one alone. We have just built and successfully started up a state-of-the-art Hydrocracker unit. This unit produces excellent fuel products.

'It also produces a heavy product which contains the building blocks - molecules for hig