GRM 2010 GRM 2011

Abstract Details

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Bahrain’s increasing energy dependence
Paper Proposal Text :
Bahrain was the first nation in the Arabian Peninsula to strike the lottery when it discovered black gold in June 1932. Although oil shaped Bahrain’s economy and development for many years to come, diversification into industry, finance, and services was eventually achieved albeit revolving around oil. Industry built forward and backward linkages as aluminium production capitalised on cheap energy. Financial institutions recycled petrodollars from the GCC and invested abroad. Services were established to facilitate oil production, refining, and export; and to cater for the employees and entire structure around it.
Fast forward to today, Bahrain’s economy seems much more resilient but the underlying structure is vulnerable to shocks as it was decades ago. Oil still plays a major role as it dictates the government’s budget in an economy which depends highly on public sector employment, tender board contracts, subsidies, and developmental strategy. The recent financial crisis and the downturn in oil prices hit the economy hard and was arguably an underlying cause of the political turmoil which followed. Public books witnessed red figures for the first time this millennium as heavy expenditure and borrowing could not be sustained without high oil prices.
As for oil production, Bahrain’s onshore field production peaked in the 1960s and settled around 32,000 barrels per day (bpd). On the other hand, Abu Saafa, its offshore field shared with Saudi Arabia, has been producing around 150,000 bpd. Moreover, most of the oil keeping the refinery’s engines going came from Saudi, which represented 82% of Bapco’s input in 2011. Plans to increase Bapco’s capacity are under way and recently, upgrades to the underwater pipeline have been announced to increase capabilities from 260,000 to 450,000 bpd.
A newly formed joint venture between American Occidental, Emirati Mubadala, and Bahrain’s National Oil and Gas Authority was set up in 2009 to upgrade and improve the onshore field infrastructure and technology. The aim is to break the 32,000 bpd ceiling and produce 100,000 bpd in seven years. Already, the new company Tatweer, was able to deliver 45,000 bpd production levels in 2011. However, the joint venture means that Bahrain receives lower royalties in the short term which could further strain the budget.
In this paper, I would like to emphasize Tatweer’s role in altering the oil production scene in Bahrain. Technologies implemented to revolutionise oil wells required contracts with two foreign firms (one western and the other regional) which will have huge considerations in the future. Moreover, the role of Saudi Arabia is ever increasing as the fiscal stance relies heavily on the shared offshore field and refining services, not to mention aid packages and the dubbed Khaleeji Marshall. On the natural gas front, Bahrain’s low reserves pushed delegates as far as Russia to secure the demand for electricity both for domestic and industrial use.
Having been an energy exporter for so many years, Bahrain’s political economy was shadowed with the resource curse but this will have to change. With higher extraction levels, reserves will run low and face an ever increasing population hike. The oil and gas industry is altering rapidly in Bahrain and is gearing itself for another wave of development as the state desperately needs its lifeline now more than ever.