BMI View: Despite limited success in boosting oil and gas production from the Bahrain field, the key development for the country will be the refining capacity expansion at the k ingdom's centrepiece Sitra refinery. However, delays to the expansion will result in a continuation of fuel export declines and a widening of the country's fiscal defic it until 2020. This marks a two- year delay to our previous forecast which saw increasing fuel exports from 2 018. Other plans envisage the construction of a LNG receiving terminal, although this is still a long way from realisation.
|e/f = estimate/forecast. Source: EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||58.0||60.5||62.5||64.6||66.8||68.6||70.3|
|Dry natural gas production, bcm||15.4||15.9||16.1||16.3||16.6||16.9||17.3|
|Dry natural gas consumption, bcm||15.4||15.9||16.1||16.3||16.6||16.9||17.3|
|Refined products production & ethanol, 000b/d||263.0||260.4||260.4||260.5||260.5||260.5||260.5|
|Refined products consumption & ethanol, 000b/d||50.0||52.5||55.1||57.9||60.2||62.6||65.1|
We highlight the following trends and developments in Bahrain's oil & gas sector:
Redevelopment work (new wells, enhanced oil recovery and improved oil recovery) undertaken at the Bahrain field are boosting oil production at the mature field. While we expect some success, the low permeability of the heavy oil reservoirs, among other issues, have led us to anticipate delays. We have not yet included all volumes projected by the project.
The weakness in oil prices is reinforcing Bahrain's unsustainable fiscal dynamics. This increases the possibility of fuel subsidy reform being implemented over the coming months and years, yielding downside risk to our refined fuels consumption forecast. However, we will wait for further details on the size of subsidy reductions and the timing to adjust our consumption forecast.
The expansion of Sitra refinery from its current 270,000b/d capacity to 350,000b/d will see production of refined fuels increase by 30%. By 2020 this will overturn the trend of declining refined fuels exports, and should provide a boost to government revenues: Bahrain's key oil exports and revenues are based primarily on its refining capacity. This is, however, a two-year delay from initial plans, which will therefore reflect negatively on the country's fiscal situation until 2020. We note increasing downside risk to its realisation: falling oil prices and new refining capacity in the region will be detrimental to late-movers such as Bahrain.
As with oil, the country is attempting to increase gas production from the mature Bahrain field. However, plans to tap Bahrain's deep gas reserves will likely take longer to develop, leaving an increasingly tight supply outlook as demand continues to rise. Given the state is prioritising gas consumption to minimise consumption of its more valuable refined fuels production, gas consumption should rise at a steady 2% rate throughout our forecast period. A small and progressive increases in gas prices to industrial users could slightly temper gas demand growth going forward
Bahrain does not import or export gas, relying solely on domestic production for its rising consumption. Plans for pipeline imports from Iran and Qatar have not materialised, and the country is now looking into constructing an liquefied natural gas (LNG) import facility to satisfy rising demand. At the moment, however, we have not included LNG imports into our forecast, as it remains uncertain as to whether or not the terminal plans will be progressed. Falling oil prices will also reinforce the country's fiscal deficit, making the funding of such a terminal more difficult.