Economic Update

Published 12 Mar 2020

Simultaneously strengthening its industrial potential and its foreign commercial ties, Bahrain has signed a series of deals with Italian firms in the energy and manufacturing sectors.

At a business event in Rome organised by the Bahrain Economic Development Board in early February, local companies signed six memoranda of understanding (MoUs) with Italian firms worth a total of €330m.

Aluminium Bahrain (Alba) signed three MoUs to expand commercial activities with industrial and manufacturing companies Fluorsid, FATA and Techmo Car.

Alba has an existing contract with Fluorsid, which sees the Italian firm supply it with 15,000-20,000 tonnes of smelter-grade aluminium fluoride each year, making up around 70% of Alba’s annual requirements. FATA has been contracted for engineering and construction work relating to Alba’s port capacity upgrade project, part of the company’s Line 6 expansion project, while Alba and Techmo share a long-standing commercial relationship.

In other developments announced in Rome, Tatweer Petroleum signed an agreement with Italian energy firm Eni to boost collaboration and launch new initiatives related to liquefied natural gas (LNG), renewable energy, and oil and gas exploration. Additionally, Gulf Petrochemical Industries Company inked an agreement with Italian oilfield services firm Saipem to assess the feasibility of new expansion projects.

Elsewhere, the Al Salam Bank signed a deal with motorsport safety equipment manufacturer OMP Racing that will see OMP increase its manufacturing activity in the kingdom.

See also: The Report – Bahrain 2020

Industrial and energy expansion

The agreements relating to energy and industrial companies come amid Bahrain’s ongoing expansion efforts in these sectors.

Last year Alba, which has largest aluminium smelter in the world outside of China, produced a record 1.4m tonnes of aluminium, representing a 35% increase on 2018.

This performance coincided with the inauguration of the company’s Line 6 expansion project on November 24. The $3bn development, the largest brownfield expansion project of its kind in the Middle East, increased annual production capacity to 1.5m tonnes.

In terms of hydrocarbons, meanwhile, in late January local company Bahrain LNG announced that it had completed the construction and commissioning of the first LNG receiving and regasification terminal in the country.

Developed as a public-private partnership under a build-own-operate-transfer model, the $600m project was carried out by the National Oil and Gas Authority and a consortium including Canadian shipping company Teekay, South Korea’s Samsung and Kuwait’s Gulf Investment Corporation.

The terminal consists of a floating storage unit, an offshore LNG jetty and breakwater, an adjacent regasification platform, subsea gas pipelines, an onshore gas receiving facility and an onshore nitrogen production facility.

Elsewhere, in late January Sheikh Mohammed bin Khalifa bin Ahmed Al Khalifa, the minister of oil, told local media that the expansion of the Sitra oil refinery, the country’s only such facility, was 40% complete and was on schedule to be completed in 2022.

The multibillion-dollar project, the largest industrial undertaking in the country’s history, aims to boost Sitra’s production capacity to 380,000 barrels per day, a 42% increase on current levels.

Growing European ties

In addition to bolstering the industrial and energy sectors, Bahrain’s recent business deals are also a sign of the country’s expanding trade relationship with Europe.

Bahraini-EU trade rose from €2.7bn in 2013 to €3.6bn in 2018, according to the European Commission’s most recent figures. This increase has seen the bloc become Bahrain’s second-largest trading partner after the UAE, accounting for 12.9% of total trade.

This comes as the government looks to encourage more foreign investment and private sector activity as part of Bahrain Economic Vision 2030, the kingdom’s long-term economic development plan.

In January government officials highlighted a series of infrastructure projects – including road, sanitation and sporting developments – that are open for foreign investment.