Both power generation and much of the industrial sector in Bahrain are fuelled by natural gas, with the country producing 557.97bn standard cu feet (scf) of dry gas per annum, according to BP’s “Statistical Review of World Energy 2014”. Most of this comes from the Bahrain field, where natural gas is found associated with oil, and a small amount is produced as a by-product of the refining process. Bahrain has natural gas reserves of about 6.7trn scf, according to BP. At present rates, the country’s reserves will last for just over a decade without new discoveries or the application of unused gas production technologies. Around the world there is an increased realisation that imported liquefied natural gas (LNG) can be an important bridge fuel away from expensive thermal energy sources, such as fuel oil, and sources with large carbon footprints, like coal.

In 2014 Singapore and Malaysia began to receive shipments of natural gas cooled to -161°C, making them the latest countries to become LNG importers. At the start of 2014 the total number of countries with LNG regasification capacity stood at 29, according to the International Gas Union. That figure is likely to double in the next 10 years as global demand for natural gas is set to grow 2.5% a year over the next decade. Bahrain announced plans in 2013 to join the ranks with a new LNG terminal.

The country is experiencing growing energy demand for natural gas, both for thermal power generation and as a petrochemicals feedstock. Other than a nascent alternative energy programme, the country is almost completely reliant on natural gas to meet its own electrical needs.

Potential Uses

Though traditionally used for power generation, LNG also has the potential to be used as a petrochemicals feedstock. With the right catalysts, methane can be used in some petrochemicals processes, such as creating ethylene. The world’s most common commodity chemical, ethylene is used in a number of chemicals and types of plastics. In some respects LNG may make a more natural feedstock. While extracted natural gas is typically only 80% methane, natural gas from LNG can be as much as 95% methane, with the remainder being ethane, nitrogen, propane or butane.

In 2013 NOGA Holding contracted the US’s Galway Group as the primary project consultant on Bahrain’s LNG terminal project. Galway Group has been involved in the development of similar LNG facilities in Hawaii, South Africa, Singapore and Uruguay. The company sub-contracted Australia’s Worley Parsons to carry out the pre-front-end engineering design (FEED) study for the project. The pre-FEED study, which was completed in 2013, also reviewed the suitability of the selected site for the terminal. Following the results of this study, the facility will likely be built at a site east of the Khalifa bin Salman Port, Bahrain’s main harbour.

The deepening of the approach channel, though meant to assist freighter traffic, will allow Q-Max LNG ships of the largest current classification to berth in Bahrain. The dredging will deepen the main approach channel to allow access to ships with a 14-metre draught. Additionally, the FEED study will decide if the terminal will feature onshore storage and regasification facilities, or if a floating production and storage offloading unit would be better.

The new LNG facility is planned to have a capacity to receive around 3m tonnes per annum. Cost estimates of the project’s total value range between $300m and $1bn, and will not be fully known until the FEED study is complete.

Looking To Different Sources

Ahead of the completion of the facility, Bahrain will likely sign an import agreement with an LNG exporter. Russia is a possible source, as well as emerging LNG producers in East Africa and Australia. In 2008 the two countries signed a letter of intent to cooperate in the oil and gas sector, and in February 2012 Bahrain announced it was in talks with Russia’s Gazprom about possible LNG imports. Abdul Hussain bin Ali Mirza, the energy minister, even stated at a meeting of the Shura Council in February 2012 that an agreement had been reached.

Despite some delays, Russia is pressing forward. In April 2014 Viktor Zubkov, the chairman of Gazprom’s board of directors, travelled to Bahrain to meet with Mirza, now minister of state in charge of oil and gas affairs, to discuss energy ties.

Saudi Arabia is another possibility for a pipeline. However, much of Saudi Arabia’s gas is associated, which means any production in natural gas would likely mean an increase in oil production, which could prove difficult. The one exception is the offshore Karan gas field, Saudi Arabia’s sole non-associated natural gas find. At present Bahrain’s price of $2.25 per million British thermal units (mBtu) for natural gas is far more than neighbouring Saudi Arabia, which has set its price at $0.70 per mBtu.

However, Saudi Arabia is considering increasing its natural gas price scheme in order to encourage production. It is estimate that to be economically viable the development of new sour gas finds in Saudi Arabia may need a price of $5 per mBtu.


Overall, the number of LNG importers may double in the next decade, but new producers will come on-line as well. Australia, East Africa and even the US, driven by the shale gas boom, are seeking to develop LNG export capacities. Currently, two other LNG facilities are projected to open in 2016: one in South Korea and one in Japan. Indeed, over the next two years the bulk of the world’s LNG receiving terminals are likely to open in East Asia.

The ongoing Bahrain Field Development Project is likely to result in another 2.7bn scf per day by 2024, which will help bolster dwindling domestic supplies and give Bahrain further flexibility in negotiations for LNG sources. Furthermore, the kingdom is considering the launch of a fourth round of exploration that could lead to the discovery of new gas fields offshore. If the finds prove large enough, NOGA Holding could consider turning the LNG import terminal into an export one.

Given these factors and a host of new LNG export projects in East Africa, North America and Australia, it is difficult to forecast if Bahrain’s natural gas price will have to be raised in order to remain competitive. The kingdom may hope to retain flexibility in the future and avoid a long-term contract. Instead, it may choose to rely on the spot market. Unlike in Europe and northern Asia, where demand peaks during the winter months, Bahrain experiences the most demand during the summer, with peak electrical demand occurring in September in 2013. In effect the LNG regasification terminal is an insurance policy rather than a limit on the kingdom’s options. This move will instead expand choices, ensuring Bahrain’s energy future remains firmly in the country’s hands.