Bahrain's energy sector boosted by modernisation and major discoveries


Domestic oil production has declined in recent years, and Bahrain has increased its efforts to accelerate diversification and realign its economy to non-oil growth. However, the oil and gas sector remains its largest economic contributor, benefitting from a growing petrochemicals manufacturing base, rising natural gas production, and a major potential offshore oil and gas discovery in the Khaleej Al Bahrain Basin (KABB). Furthermore, global oil market and geopolitical volatility have led the authorities to shore up energy reserves and security. The kingdom has invested heavily in new import infrastructure, moving to increase private sector participation in energy project development under public-private partnership (PPP) frameworks, and exploration and production sharing agreements (EPSAs).

Bahrain is also undertaking a sweeping modernisation programme at its sole oil refinery, located in Sitra, which is set to be the largest industrial project in the kingdom’s history. Together with a new supply pipeline from Saudi Arabia, an upcoming liquefied natural gas (LNG) import terminal, and new offshore production from KABB and northern Block 1, Bahrain’s refinery modernisation programme could see the kingdom regain its position as a major energy provider for the region. Such modernisation would support value-added downstream industries and manufacturing activities to further diversify long-term economic growth. Renewable energy development is also well under way, and recently tendered solar power projects offer a number of opportunities for continued private sector investment in the kingdom’s solar industry (see analysis).

Structure & Oversight

The National Oil and Gas Authority (NOGA), which was established in 2005, holds primary responsibility for supervising oil and gas development in Bahrain. It is overseen by Sheikh Mohammed bin Khalifa bin Ahmed Al Khalifa, minister of oil. NOGA’s work is guided by a broad mandate that includes regulating companies and establishments, increasing revenue to support and boost the national economy, developing associated industries, supporting research and development activities, crafting policy, ensuring the sustainable supply of oil and gas, and encouraging investment.

The portfolio of nogaholding, NOGA’s investment arm, includes Tatweer Petroleum – Bahrain Field Development Company (Tatweer Petroleum) and the Bahrain Petroleum Company (Bapco). Tatweer Petroleum is responsible for all upstream operations in Bahrain, including oil and gas exploration, development, and production activities; in addition to gas distribution and sales. Meanwhile, Bapco manages the kingdom’s downstream operations, including the Sitra refinery. Bapco is undertaking a multibillion-dollar modernisation programme that will transform Sitra into a top refinery globally.

The Bahrain National Gas Company (Banagas) is majority owned by nogaholding, which holds a 75% stake. In tandem with the Bapco upgrades, Banagas has made heavy investments in upgrading its infrastructure, most recently with the Central Gas Plant Three (CGP-III) project. nogaholding holds stakes in the Bahrain Jet Fuel Company (50%), the Bahrain Aviation Fuelling Company (BAFCO, 60%), the Gulf Petrochemical Industries Company (GPIC, 33%), the Bahrain Lube Base Oil Company (27.5%), Bahrain LNG (30%) and Bahrain Gasoline Blending (42.5%). In November 2019 nogaholding acquired government shares in the Arab Shipbuilding and Repair Yard Company. Bapco supplies BAFCO with aviation fuel, while Tatweer Petroleum supplies power plants with natural gas. The company also exports globally, and sells petroleum products locally and internationally.

Utilities & Renewables

The Electricity and Water Authority (EWA) is responsible for providing reliable and high-quality water and electricity to the kingdom, as well as setting tariffs. Under the EWA’s Corporate Strategy Map 2018-22, the authority is seeking to increase revenue collection and lower the unit cost of water and electricity, thus gradually reducing the historic funding gap. Subsidy reductions mandated by the kingdom’s Fiscal Balance Programme have factored prominently into these plans. Working with the kingdom’s Sustainable Energy Unit (SEU), a joint initiative with the UN Development Programme established in November 2014, the EWA is working to develop net metering systems for renewable energy projects, as well as new small-, medium-, and large-scale projects under the National Renewable Energy Action Plan (NREAP), unveiled in October 2016 by the SEU and the kingdom’s first-ever renewable energy master plan.

Endorsed by the Cabinet in January 2017, the NREAP identifies multiple renewable energy development options for Bahrain, and includes targets, proposed policies and initiatives to achieve those goals. Its objective is to increase renewable energy’s contribution to 5% of the total energy mix by 2025 and 10% by 2035, using a combination of solar, wind and waste-to-energy technology.


Bahrain is the smallest oil producer in the GCC and is not a member of the Organisation of the Petroleum Exporting Countries. Almost one-sixth of its primary supply is sourced from the onshore Bahrain Field, while the remainder is imported from Saudi Arabia via the AB pipeline network, which was recently expanded to add a new pipeline offering 350,000 barrels per day (bpd) of capacity.

As the first GCC member to discover oil and gas reserves back in 1932, and a major regional oil producer until the late 1980s, the kingdom’s economy is nonetheless centred on the petroleum sector. While Bahrain’s Economic Vision 2030 focuses on diversifying the economy away from oil and gas in an effort to support sustainable macroeconomic growth and offset falling petroleum production, hydrocarbons remain a vital part of the Bahraini economy, with the Sitra refinery maintaining its position as an important source of government revenue.

The Ministry of Finance and National Economy (MOFNE) reports that oil and gas was the largest economic sector in the kingdom in 2018, accounting for 17.8% of real GDP, although the sector’s economic dominance has waned in recent years, falling from 43.6% of GDP in 2000 and 22.7% in 2008. According to a February 2019 report from Reuters, the 2018 draft budget projected the kingdom would earn BD1.8bn ($4.8bn) from oil revenue that year. Furthermore, in its most recent Article IV consultation for Bahrain, released in May 2019, the IMF reported oil revenue’s share of GDP fell from 13.8% in 2015 to 12% in 2016, before recovering to 12.6% in 2017 and up to an estimated 16% in 2018. The fund forecast that oil revenue would account for around 13.9% of GDP in 2019 and decline slightly to 13.5% in 2020.

The sector did not perform optimally in 2018, contracting by 1.3%, against a 0.7% contraction in 2017, with the MOFNE reporting that this offset an increase of 2.5% in the non-oil economy to bring total GDP growth to 1.8% for the year. Oil and gas growth rebounded to 11.3% in the fourth quarter of 2018, following seasonal maintenance that had disrupted production earlier in the year, and total crude oil production dropped by around 1.6% in 2018. In its “Bahrain Economic Quarterly” publication for the first quarter of 2019, the MOFNE said the oil sector was projected to “remain static” throughout 2019, as work progressed on several major strategic projects, including the Bapco upgrade, that are not due to be completed by the end of the year.


Bahrain generates oil revenue from the onshore Bahrain Field and the offshore Abu Safa field. It shares the Abu Safa field with Saudi Arabia and receives 150,000 bpd from the field under a political agreement reached with its neighbour in 1958. Saudi Arabia’s state-owned oil firm Saudi Aramco oversees production. Under the agreement, Saudi Arabia shares Abu Safa production via pipeline, Bahrain refines it at Sitra, and Bapco markets refined products domestically and internationally. Around 92% of refined products are exported and 8% are consumed domestically.

At the Bahrain Field, production fell from 50,000 bpd in 2015 to around 45,000 bpd in early 2018, against a government target of 100,000 bpd. Growth continued trending downwards throughout 2018, with the MOFNE reporting that although oil production in the fourth quarter of 2018 rose to 197,990 bpd, a 12.4% year-on-year (y-o-y) increase, this marked a 0.3% decline from levels seen in the third quarter of 2018.

The kingdom received 152,057 bpd from the Abu Safa field in the fourth quarter of 2018, a 0.6% y-o-y decline, while production at the Bahrain Field slipped by 4.8% y-o-y during the same period to 42,122 bpd, bringing total crude production for 2018 to 194,179 bpd, a 1.6% y-o-y decrease. Abu Safa production averaged 153,225 bpd in January and February 2019, according to the most recent MOFNE data, while the Bahrain Field’s production fell to 41,020 bpd.

The kingdom is also a minor producer of natural gas, with most of its production originating from non-associated gas in the Bahrain Field. According to the 2019 “BP Statistical Review of World Energy”, natural gas production has risen steadily over the past decade, from 12bn cu metres in 2008 to 12.6bn in 2011, 14bn in 2013, 14.4bn in 2016 and a high of 14.8bn in 2018. The US Energy Information Administration (EIA) reports that the kingdom consumes all of its 549bn cu feet of annual production domestically.


NOGA has reached EPSAs in offshore Blocks 1, 2, 3 and 4, most recently in Block 1 with Italian firm Eni. Both offshore and onshore exploration face complexities given the terrain. While Bahrain’s onshore reserves may prove significant, the kingdom’s geography poses a significant challenge to new exploration and production activities. As highlighted in a 2003 report published jointly by the Society of Petroleum Engineers and Bapco, onshore exploration and production faces several obstacles as a result of Bahrain’s geology, which is “extremely complex with a large number of faults, especially in the Wasia group formations, which contain the major oil reserves of the Bahrain Field”. Bapco undertook an extensive 3D seismic survey in 1998, and researchers encountered significant challenges in attempting to adequately assess alternative production mechanisms, including complex rock and fluid distribution, from heavy oil to gas condensate, aquifer encroachment, and high fracture density and intensity.

KABB Discovery

Bahrain’s status as a minor oil and gas producer could change over the medium term, however, after the discovery of the offshore KABB in 2017 – the largest oil and gas discovery in the kingdom. While estimates of its recoverable reserves vary, seismic studies published by US consultancy DeGolyer & MacNaughton showed that P50 estimates are 81.5m barrels of light oil and 13.7trn cu feet of tight gas. P50 indicates that reserves have a 50% chance of being commercially recoverable. However, in April 2018 industry consultancy Wood Mackenzie, citing US oilfield services company Schlumberger, reported that KABB’s formation “could be classified as a borderline conventional-unconventional play”, noting that “a tight reservoir means a low recovery factor and only a fraction of the [more than] 80bn barrels is likely to be recoverable”.

Indeed, UK-based Resource Economist noted in 2018 that the average recovery rate for tight oil in North America stands between 20% and 40%. This would still mean, however, that the KABB offshore discovery could last around 35 years producing at a rate of 200,000 bpd – more than quadrupling the kingdom’s current production levels.


This has prompted Bahraini authorities to offer favourable concessions to international oil companies as it seeks investors for the field. Attractive investment terms are viewed as one of the key criteria for successful production of KABB. Noting that Bahrain has previously been viewed as offering tough investment terms by international standards, the Financial Times reported in October 2018 that the kingdom plans to offer concessions that will allow international companies involved in the project to book reserves from the basin on their balance sheet. It will also offer EPSAs where revenue is shared in percentage terms, instead of contracts offered by countries like Iraq, where contractors are paid a set fee. Attracting additional investment will be a priority for the authorities as they move to bring new reservoirs into production, as evidenced by the May 2018 establishment of an energy sector fund that seeks to raise $1bn from both local and international energy investors. The kingdom is particularly interested in working with companies in the US shale oil sector, where hydraulic fracturing has dramatically transformed the country’s energy landscape and contributed to the low oil prices that have affected GCC countries since mid-2014, when the price of Brent crude declined from about $115 per barrel to around $30 per barrel in early 2016.

Prices have since recovered to hover around $60-70 per barrel, buoyed by geopolitical tensions between Iran and Saudi Arabia, and the September 2019 attack on Saudi Aramco. Nonetheless, current global market conditions necessitate increasingly attractive terms for international oil companies looking to invest in new exploration and production activities.

Block 1

A number of promising exploration activities are under way at Bahrain’s offshore Block 1. After Italian energy firm Eni conducted a joint study with NOGA in 2016 and signed a memorandum of understanding with the authority in January 2019, the company announced it had signed an EPSA for the block, also called the North Block, in May 2019. As part of the agreement, Eni will explore an offshore area covering 2800 sq km of Bahrain’s northern territorial waters, with water depths ranging from 10 to 70 metres.

The Italian power provider has achieved success in a similar project launched in Egypt, where it located the largest gas discovery ever made in the country and the Mediterranean. The Zohr gas field, located in the offshore Shorouk Block, reached production of 2.7bn cu feet per day of natural gas in August 2019 – five months ahead of schedule.


Bahrain has also been intensifying efforts to expand and diversify its petrochemicals offering with ongoing upgrades to GPIC’s facilities (see Industry chapter). Notable milestones in 2018 include the successful completion of the $600m Banagas CGP-III project, which will enable the recovery of high-value-added petroleum constituents such as liquefied petroleum gas and naphtha.

In January 2016 JGC Gulf International, a subsidiary of Japan’s engineering company JGC Corporation, was awarded a $355m engineering, procurement and construction contract for the CGP-III train. It will build capacity to process 350m standard cu feet per day (scfd) of associated dry gas. In October 2016 JCG Gulf International was awarded another turnkey contract for feed and product gas transfer pipelines, and product gas storage tanks to complement CGP-III’s third train. In March 2019 the company announced it was scheduled to commence work on the latest contract; however, as of October 2019 a timeline for completion of the project had not been made public.


In an effort to bolster and secure energy stores, and to ensure adequate feedstock for the Sitra refinery expansion, the government has moved to launch a new 112-km pipeline that includes a 42-km onshore segment in Saudi Arabia, a 28-km onshore segment in Bahrain and a 42-km offshore segment connecting the Sitra refinery to Saudi Arabia’s Abqaiq oil field. Commissioned in October 2018, the AB-4 pipeline has a capacity of 350,000 bpd. Furthermore, the authorities announced that the existing 73-km pipeline system that had been supplying Bapco with crude oil will eventually be decommissioned.

In natural gas, the kingdom has made recent headway in ensuring adequate supply with the launch of a $600m offshore LNG terminal project. Developed under a build-own-operate-transfer PPP model, the project was created by a consortium including NOGA, Canadian shipping company Teekay and the Gulf Investment Corporation. The project was designed with a capacity of 400 scfd, expandable to 800 scfd, with facilities including a floating storage unit, offshore LNG-receiving jetty, breakwater and regasification platform. The terminal will also comprise subsea gas pipelines connecting it to the mainland, an onshore gas-receiving facility and an onshore nitrogen production plant. Although it was due to come on-line in May 2019, the project’s commercial launch has since been delayed. In August 2019 the consortium announced that the new LNG terminal was not expected to launch until the fourth quarter of the year.


The Sitra refinery is the oldest in the GCC, and its fluid catalytic converter, originally used to supply Allied forces with fuel during the Second World War, is the oldest in the world. Initially offering 10,000 bpd of capacity when it came on-line in 1936, nameplate capacity has since risen to reach 267,000 bpd.

BP reports that total refinery throughput rose from 257,000 bpd in 2008 to 264,000 bpd in 2013 and 266,000 bpd in 2015, before moderating to 258,000 bpd, 262,000 bpd and 261,000 bpd in 2016, 2017 and 2018, respectively. Refinery throughput will likely moderate in 2019 as work on Bapco’s modernisation programme advances and in the wake of the attacks on Saudi Aramco’s facilities. In September 2019 media reports emerged that Saudi Arabia had shut down its crude oil pipeline to Bahrain, which transports between 220,000 bpd and 230,000 bpd to the Sitra refinery. According to Reuters, as of September 2019 the country was in the process of mobilising vessels to transport 2m barrels of crude oil from Saudi Arabia. However, at that time there was no timeline available for when the pipeline would be re-opened.

Bapco also operates storage facilities for 14m barrels of crude feedstock and products, a marketing terminal and a marine terminal. Approximately 90% of Bapco’s total refined exports leave from this terminal.

Modernisation Project

Bapco announced in March 2019 that it had laid the foundation for the Bapco Modernisation Programme (BMP), anticipated to be the largest industrial undertaking in the history of Bahrain. The expansive project aims to boost Sitra refinery’s maximum production capacity to 380,000 bpd, marking a 42% increase. Upgrades to its hydrocracking unit will enable the refinery to convert 78% of lower-grade feedstock into distillates, which will be refined into high-value diesel and kerosene.

The BMP will be also be a boon to Bahrain’s construction industry. The project, which will span an area of 566,000 sq metres, is expected to create more than 24,000 contractor jobs, 1500 jobs during its construction phase and 150 permanent, high-skilled jobs. It will require 65,000 tonnes of structural steel and more than 2700 km of electrical cabling, both of which are produced locally in Bahrain (see Industry chapter).

In December 2017 the UK’s TechnipFMC, Samsung Engineering and Spanish firm Técnicas Reunidas were awarded a $4.2bn engineering, procurement, construction and commissioning turnkey contract for the project, with construction expected to finish in 2022. When it does, the Sitra refinery will be one of the most valuable oil- and gas-refining facilities globally. These firms will work to revise the refinery’s configuration to allow for higher throughput, improve the product offering by focusing on valued-added products and increase the refinery’s gross margin so as to remain competitive in a shifting global energy market.

Upgrades will be carried out on hydrocracking, hydrocracker and hydro-desulphurisation units – an important consideration given international standards for sulphur content in marine fuels are expected to be upgraded in 2020 – as well as its crude distillation, vacuum distillation, hydrogen production, hydrogen recovery, sulphur recovery, tail gas treatment, sour water stripper, amine recovery, bulk acid gas removal and sulphur solidification units. Its saturated gas plant and sulphur-handling facilities will also be upgraded, as will utilities and offsites. In addition, the project will lower the refinery’s energy intensity index by installing new energy-efficient crude and process units.


The EIA reports that Bahrain’s installed generation capacity is around 4 GW. Energy demand is growing rapidly in response to steady expansion of industrial and manufacturing industries and domestic population growth, particularly aluminium and petrochemicals, both of which rely on cheap supply of natural gas feedstock to underpin profitability.

In a December 2018 report renewables research website EcoMENA found that Bahrain’s energy consumption is among the highest globally, with per capita consumption standing at 11,500 KWh, against the international average of 3030 KWh. The challenge is not limited to electricity. “Extensive analysis has shown that Bahrain is one of the world’s highest per capita consumers of water. By some estimates, consumption stands at about 591 litres per person per day,” Juergen Nick, CEO of energy efficiency consultancy Aryani, told OBG. Rising population, urbanisation and industrialisation have contributed to soaring energy demand, with the NREAP reporting that grid electricity consumption increased from 5520 GWh in 2000 to 15,200 GWh in 2014, for a compound annual growth rate of approximately 7.5%. Part of the problem is attributed to outdated mechanisms for measuring and billing utilities. “A lot of the residential buildings here have only one meter to measure water for multiple units, so the cost is split evenly among all the tenants. This is a disincentive for water conservation and leads to wastage,” Nick told OBG.

Under various scenarios analysed by the SEU in compiling the NREAP, grid consumption is forecast to rise to between 21,700 GWh and 34,550 GWh by 2030, making upgrades and expansions to existing utilities infrastructure, as well as improved energy efficiency, critical priorities for the kingdom. The EWA is working to improve operating losses and boost sustainability, as mandated by the Energy Efficiency Implementation Programme and the broader Fiscal Balance Programme, gradually reducing and removing electricity subsidies that have been on offer to residential and industrial consumers for several decades.


Despite facing challenging external conditions and declining domestic oil production, Bahrain’s energy sector is positioned for significant mid-term expansion, supported by the BMP and its knock-on benefits to downstream and manufacturing industries, ongoing offshore exploration and production activities that could allow authorities to reap considerable long-term economic benefits. It also benefits from a burgeoning renewable energy programme that has already attracted significant investor interest (see analysis). Although energy sector growth will likely be subdued in 2020 as work on BMP progresses, the mid- and long-term outlooks are broadly positive, supported by government moves to boost private sector participation in energy projects, attractive investor incentives, and rising local and regional demand.

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The Report: Bahrain 2020

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