Page 6 - MEOG Week 29

MEOG Commentary MEOG

Bahrain continues to suffer

as Causeway remains closed

Manama has been cut off from the Saudi mainland and a reliable source
of revenue. Despite plans to carry out partial privatisation of oil and gas

assets, the island will continue to struggle more than its neighbours.

Bahrain RATINGS agency Moody’s noted the severe inflows over the next couple of years, given tur-
plunge in Bahrain’s central bank reserves over bulent global economic and financial conditions.
the past few months, highlighting the country’s The island’s struggles were demonstrated
What: acute external vulnerability risk. when Bahrain Petroleum Co. (BAPCO)
Bahrain’s fiscal reserves The island state continues to suffer more than announced it would cut its expat workforce in
have fallen off a cliff and most of its Gulf neighbours, with the King Fahd response to the impact of COVID-19.
the country was only just Causeway, which connects it to Saudi Arabia’s
saved from a full-blown Eastern Province, remaining closed. The bridge hydrocarbon hopes
current account crisis by has been off-limits since March 7 as Riyadh, and The onshore Awali field, the site of the GCC’s
a sukuk issuance in May. to a lesser extent, Manama, sought to contain the first oil find in 1932, remains the kingdom’s
spread of coronavirus (COVID-19). Bahrain is a sole source of domestic production of around
Why: popular weekend destination for Saudis and the 46,000 barrels per day. Manama also receives a
Manama has hopes that large numbers of expats living in the Dammam/ 50% share of the 150,000 bpd produced by Saudi
the offshore Khaleej Khobar area, and the hospitality sector on the Aramco at the offshore Abu Sa’fah,
al-Bahrain Basin will island has suffered greatly since this key revenue In April 2018, Bahrain announced the big-
provide a turnaround stream was cut off. The causeway is expected to gest oil discovery since the Awali discovery by
in fortunes, but its reopen gradually after the Eid al-Adha holiday, Chevron. The shallow-water Khaleej al-Bahrain
complex geology and which runs from late July into early August. (KAB) Basin off the west coast is estimated to
offshore location make Moody’s said that the drop in reserves to contain around 80bn barrels of unconventional
it a challenging prospect a nadir of $800mn in April, equivalent to 0.5 oil. Halliburton was contracted to carry out ini-
in current market months of non-oil imports of goods and ser- tial drilling and well tests in the 2,000-square
conditions. vices, was averted from snowballing into a km area. The government’s National Oil & Gas
fully-fledged current account crisis thanks to Authority (NOGA) initiated talks with inter-
What next: proceeds from a $2bn international bonds and national companies, primarily those engaged
There has been talk of sukuk issuance in May. in the uS shale industry, about developing the
a partial privatisation Central bank foreign currency reserves resource.
of Bahraini oil and gas declined in March and April despite a significant In April last year the discussions bore fruit
assets, but these hold increase in the onshore banks’ net foreign liabil- in the form of a letter of intent (LoI) signed by
less appeal that those of ities from January to March of around $2.6bn, NOGA’s investment arm Nogaholding and
neighbouring countries. which would normally have been expected to shale-specialist Chevron calling for the uS major
support Bahrain’s balance of payments and lead to assist the state firm’s Tatweer Petroleum sub-
to an accumulation of central bank reserves, sidiary in evaluating the basin. No further details
Moody’s said. on the terms of the accord were disclosed.
However, looking ahead, the outlook for Then in May, the Bahraini government
Bahrain’s balance of payments situation remains signed an exploration and production-shar-
precarious, it added. The ratings agency antici- ing agreement (EPSA) with Eni for an offshore
pates Bahrain’s current-account deficit widening block in the north. In February this year, the Ital-
sharply to 7% of GDP in 2021, up from 2.1% of ian firm signed an Mou with Tatweer to explore
GDP in 2019. collaboration in various domains, including gas.
With foreign currency reserves of $1.8bn at Speaking to Middle East Oil & Gas (MEOG),
the end of May, Moody’s argues that Bahrain’s a Manama-based source said: “We have made
ability to attract additional net capital inflows progress at KAB. We haven’t said much publicly
this year will be critical to sustaining the cur- because these are very early days, but early devel-
rency peg and avoiding a depletion of reserves. It opment of the gas is ongoing.”
identifies further drawdowns from the $10.25bn In March, Bloomberg cited Bahrain’s Oil
Gulf Cooperation Council (GCC) financial Ministry as saying that a roadshow would be
support facility as the primary source of capital held later in the year to invite IOCs to bid on gas

P6 www. NEWSBASE .com Week 29 22•July•2020