As part of Oxford Business Group’s (OBG) 2022 report on Bahrain, shared with Economy Middle East, the country appears well on its way to transforming its oil and gas sector, while also beginning to ramp up investment in renewables as it works towards its goal of reaching net-zero carbon emissions by 2060.
Bahrain’s oil and gas sector
Though Bahrain does not produce as much oil as its larger neighbors, the energy industry remains a vital part of the national economy. This has been helped by a large-scale oil and gas discovery in 2018, that revealed 80 billion barrels of shale oil and 20 Tcf of gas offshore. The kingdom is hoping to commercialize the discovery by 2023 while it also upgrades its main refinery in Sitra.
In September 2021 Bahrain announced plans to restructure its oil and gas industry. A royal decree was issued abolishing the National Oil and Gas Authority (NOGA), while its investment and development arm nogaholding was spun off and is transitioning to become more focused on clean energy as the kingdom seeks to reduce its dependence on fossil fuels, OBG reported.
In February 2022 nogaholding announced it was in the process of hiring advisers to develop a new national energy strategy, which would include a potential sale of stakes in its assets, either to private investors or through an initial public offering (IPO) process.
It wholly owns the Bahrain Petroleum Company (Bapco), the GCC’s oldest oil firm, which owns and manages the refinery at Sitra. It also holds a 100% stake in Tatweer Petroleum, which manages the Bahrain Field, the kingdom’s main onshore oil field and the source of most of its energy supply. nogaholding also owns a 75% stake in the Bahrain National Gas Company (Banagas) and is a major stakeholder in several other key industry players, including the Bahrain Jet Fuel Company and the Gulf Petrochemical Industries Company.
Oil and gas industry size
According to the US International Trade Administration, as of September 2021, Bahrain had 124.6 mn barrels of proven oil reserves. It has two principal oilfields: the onshore Bahrain Field and the offshore Abu Safah Field, which is shared with Saudi Arabia and operated by Saudi Aramco.
According to The Ministry of Finance and National Economy (MFNE), crude petroleum and natural gas accounted for 17.4% of Bahrain’s GDP in the fourth quarter of 2021, a share that has more than halved since 2008.
Prior to Russia’s invasion of Ukraine in February 2022, MFNE had forecast in the national budget that revenue from oil and gas would reach $4.1billion in 2022, based on an oil price of $50 per barrel. But at double that estimate with average prices around $100 per barrel, Bahrain may well balance its budget much earlier.
As for the gas sector, between 2010 and 2020, natural gas production increased at a compound annual growth rate of 2.8%, according to British Petroleum’s (BP) “Statistical Review of World Energy 2021”. At the end of 2020, BP estimated the country’s total gas reserves at 2.3 trillion cubic feet.
Under its National Renewable Energy Action Plan (NREAP), Bahrain has set a target of meeting 5% of its energy needs with renewables by 2025.
To achieve these objectives, Bahrain will need 280 MW of electricity generation capacity from renewables by 2025, increasing to 710 MW by 2035.
Given Bahrain’s climate, solar energy is a vital part of the kingdom’s clean energy mix, accounting for 93% of its renewable capacity in 2020, OBG said.
In November 2021 the government inaugurated the Batelco solar plant, which can produce some 1600 MW of power and is expected to reduce the country’s carbon emissions by around 900 tons.
There is also a project underway to develop a solar plant at Askar on the country’s south-eastern coast, which would provide 100 MW of capacity.
To offset the kingdom’s relative scarcity in terms of available land, Bahrain is considering constructing floating solar panels in order to support the ongoing transition to green energy.
In March 2022 the kingdom announced that it had successfully completed a project to develop a solar plant at the Bahrain International Circuit, which hosts the annual Bahrain Grand Prix Formula 1 race.
In seven months, 7125 solar panels covering 18,000 sq meters were installed.
Offshore wind is also a promising sector due to Bahrain’s favorable wind conditions and its shallow waters, which are conducive to the installation of wind farms.