Bahrain, which was the first country in the Gulf where oil was discovered, is navigating the challenges and opportunities of the energy transition. While focusing on renewables production, energy efficiency and sustainability, new drilling projects in Bahrain’s offshore oil fields, combined with significant investment projects, indicate that hydrocarbons will continue to play an important role in the country’s economy. In terms of the domestic energy mix, electricity production is still solely reliant on gas, although Bahrain is building its first utilities-scale solar energy project to bring it towards its economic diversification targets.
Legislation
The evolution of the legal framework governing asset management in the energy sector can be traced through four key laws. Royal Decree No. 78 of 2005 established the board of directors of the National Oil and Gas Authority (NOGA). It stated that NOGA would be the organisation responsible for all matters related to oil and gas in the kingdom, including energy policy, development and the regulation of associated sectors, including oil shipping.
Royal Decree No. 77 of 2007 established nogaholding, the parent company of Bahrain’s oil and gas companies, which provides oversight for the refinery, field development and retail segments. As a result of Royal Decree No. 99 of 2021 NOGA was absorbed into the Ministry of Oil and Environment (MoOE), with all of NOGA’s employees, funds and tasks transferred to the ministry in the process. Notably, the responsibilities laid out in Decree No. 78 of 2005 still apply to the MoOE. Royal Decree No. 49 of 2023 renamed nogaholding to Bapco Energies in order to emphasise the transition to a more diversified portfolio that is not solely focused on hydrocarbons. The former subsidiaries of nogaholding are being restructured and renamed under the Bapco Energies brand, a process that is expected to be fully complete in 2026.
Bahrain’s utilities sector is regulated by Royal Decree No. 1 of 1996 on Electricity and Water, which lays out the responsibilities of the Electricity and Water Authority (EWA), Bahrain’s primary utilities regulator. These include the transmission and distribution of electricity, the storage and distribution of water, and the supervision of electricity and water fees. The decree has been amended multiple times, including in 2004 for water transmission infrastructure, and in 2018 to add safety requirements concerning electricity installation.
Another law for the utilities sector is Royal Decree No. 38 of 2024, which restructured the EWA and clarified the roles of its leadership and its regulatory tasks. Another EWA-related decree was issued in March 2024, allowing the EWA to create firms for public-private partnerships and to hold stakes in private entities that conduct activities in the water and electricity segments. The goal is to boost private sector participation in these areas.
Oversight
As of September 2024 the MoOE was led by Mohamed bin Mubarak Bin Daina, minister of oil and environment, who also serves as the special envoy for climate affairs. The MoOE is the supervisory authority for the oil and gas sector and is aided with policy formulation and implementation by the Higher Committee for Energy and Natural Resources. This organisation is chaired by Crown Prince Salman bin Hamad bin Isa Al Khalifa, who is also the prime minister. The committee’s responsibilities cover, among other things, the National Energy Strategy, the Bapco Modernisation Programme, and the implementation of energy-related projects and initiatives under Bahrain Economic Vision 2030, the country’s long-term socio-economic development blueprint.
The EWA also runs multiple sustainability initiatives. In April 2024 the EWA was restructured to group the authority’s responsibilities by task – such as water affairs – rather than by infrastructure role, such as transmission. Various executives oversee the regulation of specific segments, including the electricity distribution directorate, the electricity transmission directorate and equivalent directorates for water. The EWA is also in the process of shifting from a government authority to a government-owned firm, with a separate regulatory entity expected to be established to oversee utilities. The EWA is also responsible for project planning, the administration of government-owned power producers and implementing the government’s utilities plans.
In addition, the Supreme Council for the Environment holds a position similar to that of the Higher Committee for Energy and Natural Resources. This body is led by the minister of oil and environment, and reviews and formulates plans that affect Bahrain’s energy, soil and water policies.
Strategy & Policy
Bahrain’s overarching national strategy is Bahrain Economic Vision 2030, which targets economic diversification, improved competitiveness and enhanced sustainability. As part of this roadmap, the government aims to lessen the dominance of the oil and gas sector, which accounts for over 70% of government revenue, and reduce the country’s debts and deficits. For the energy and utilities sectors, the guiding framework is the National Energy Strategy, which was unveiled in December 2023. In addition to emissions reduction goals, the roadmap aims to reduce per capita energy demand and invest in more sustainable sources of energy.
As part of its wider diversification strategy, Bahrain is targeting a 30% reduction in emissions by 2035 and net-zero emissions by 2060. In order to aid progress towards its sustainability goals, in July 2020 the kingdom issued its first pilot renewable energy certificate to help encourage the small-scale implementation of renewable energy projects in Bahrain. The government also promotes cooperation with foreign entities in order to help bring expertise to country’s renewables sector.
The country’s goals also include reducing reliance on fossil fuels for domestic energy generation. The three-pronged approach to this task involves expanding the role of renewables, reducing energy demand and limiting waste – especially in industry. Bahrain’s energy plans include the National Renewable Energy Action Plan, which was launched in 2017. This roadmap aims for renewable energy to constitute 5% of the local energy mix by 2025 and 20% by 2035. This translates into 255 MW of installed capacity by 2025 and 710 MW by 2035, with estimated savings of BD1.6m ($4.2m) by the plan’s end-date.
The government also mandates the integration of sustainable technologies into new buildings. The majority of the planned capacity is set to come from solar power, with offshore wind generation to supply 50 MW. The National Energy Efficiency Action Plan (NEEAP), also launched in 2017, highlights the necessity of reducing domestic energy consumption, as a business-as-usual approach would make Bahrain a net gas importer. The country achieved its aim of reducing national energy consumption by 6% in 2019, six years ahead of schedule, but the policies of the NEEAP served as the starting point for Kafa’a, announced in December 2023.
Kafa’a, another energy-efficiency blueprint aligned with Bahrain’s long-term development agenda, was created in efforts to reduce electricity consumption by 975 GWh in both the public and private sectors by 2040. As a pilot project, the programme will initially focus on retrofitting 20 government buildings, working in collaboration with leading regional energy service companies. In May 2024 the EWA then signed a partnership agreement with Etihad Energy Services Company, a subsidiary of Dubai Electricity and Water Authority, in a move to help ensure the successful implementation of the programme. Kafa’a aligns with the Bahraini government’s energy transition goals and its commitments to reduce carbon emissions by 30% by 2035 and reach net zero by 2060.
The primary target for both energy efficiency and emissions reduction remains Bahrain’s energy sector. Bapco Energies estimates that the organisation and its 15 subsidiaries are responsible for 70% of Bahrain’s emissions. The firm targets a 30% cut in methane emissions by 2030, a 25% drop in greenhouse gas emissions by 2030 and a 75% reduction in total emissions by 2050. Bapco Energies also committed to reducing flaring, although this had already decreased by almost 60% between 2020 and mid-2024.
Key Players
Within the energy sector, nearly all of the major actors are either wholly or majority-owned by Bapco Energies. In 2022 the Bahrain Petroleum Company (Bapco) exported 79.9m barrels of petroleum products, of which 39.8% went to the Middle East, 17.9% to Africa, 14.5% to East Asia and 10.2% to South-east Asia. Bapco has since been restructured as Bapco Refining, one of the holding group’s major operating companies. This entity owns and operates a 267,000 barrel-per-day (bpd) refinery, which is expected to increase to 380,000 bpd with the completion of the Bapco Modernisation Programme. The programme is the largest capital investment project undertaken in Bahrain’s history. Originally slated for completion in 2022, the project faced setbacks due to the Covid-19 pandemic. By May 2024 the development was 80% complete.
Bapco Energies is also a 75% shareholder in Bahrain National Gas Company – known as Bapco Gas – with US-based multinational Chevron and Kuwait’s Boubyan Petrochemical Company each owning 12.5% shares. Bapco Gas operates primarily in the oil extraction and gas processing segments. Its gas processing output more than doubled between 2017 and 2022, from 107,000 tonnes in 2017 to 236,000 tonnes in 2022, consisting primarily of propane, butane and naphtha for export markets.
Elsewhere, Bahrain Gas Expansion Company, known as Bapco Gas Expansion, runs gas processing facilities. Bapco Tazweed is a wholly owned Bapco Energies subsidiary that operates petrol service stations in Bahrain, with an estimated 35% market share. Meanwhile, Tatweer Petroleum, which does business as Bapco Upstream, is responsible for all oil and gas exploration in the country, in addition to gas production and distribution.
Bahrain Liquefied Natural Gas (LNG) – which operates the country’s LNG regasification terminal and storage areas – has substantial foreign ownership, with Bapco Energies holding a 30% share. The remainder is held by Bermuda-based LNG vessel operator Seapeak Maritime with 30%, Kuwait-based Gulf Investment Corporation (GIC) with 24% and South Korea’s Sam Gulf Investment with 16%. Bapco Energies, Saudi Basic Industries Corporation – known as SABIC – and Kuwait Integrated Petrochemicals Industry Company all hold 33.3% shares of Gulf Petrochemical Industries Company, Bahrain’s producer of urea, ammonia and methanol. Furthermore, Bapco Energies is the primary shareholder of three fuel companies, with a 60% share of Bahrain Aviation Fuelling Company, a 50% share of BAC Jet Fuel Company and a 42.5% share of Bahrain Gasoline Blending.
Oil Production
By regional standards Bahrain is a relatively small oil producer, with approximately 125m barrels in proven oil reserves as of May 2024, which is considerably less than its GCC neighbours. Although an announced find of approximately 80bn barrels of offshore shale oil in April 2018 was greeted with excitement, the discovery has yet to leverage its full economic potential due to the high costs of extraction and production. The majority, or around 150,000 bpd, of Bahrain’s production is sourced from the offshore Abu Safah field which it shares with Saudi Arabia, while the remainder comes from the onshore Bahrain oil field. According to government figures, onshore crude production averaged around 43,000 bpd between 2017 and 2021. The country’s gas production increased from 14bn cu metres in 2012 to 16.7bn cu metres in 2022. Gas consumption in 2020 and 2021 stood at 6647 cu metres and 7085 cu metres, respectively. In March 2024 the Export-Import Bank of the US approved a $500m loan for over 400 new oil and 30 new gas wells in Bahrain. All production associated with the initiative is expected to be consumed within the kingdom.
While oil rents as a percentage of GDP fell from 23.4% of GDP 2011 to 10.9% of GDP in 2021, the government still relies on oil revenue for more than 70% of its income. This has proved to be a challenge as Italian oil major Eni exited its exploration asset in 2022 after exploratory drilling in the 80bn-barrel field failed to yield promising results. While Bapco Energies’ revenue in 2022 jumped to $11bn, up from $7.3bn in 2021, this was mostly driven by a dramatic increase in oil prices linked to Russia’s conflict with Ukraine and the resultant disruption to global energy markets. However, through the $7bn Bapco Modernisation Programme, Bapco Refining is anticipated to boost its refining capacity by more than 40% – thereby significantly increasing foreign earnings.
In 2022 Bahrain exported $4.3bn worth of refined petroleum, up from $2.3bn in 2021. The top-five export markets for Bahraini refined petroleum that year were South Africa ($798m), Japan ($569m), South Korea ($843m), the UAE ($386m) and the Democratic Republic of the Congo ($256m). Meanwhile, Bahrain’s crude petroleum exports totalled $344m in 2022, down from $390m in 2021. Petroleum gas exports made up over 0.87% of Bahraini exports by value in 2021, which then rose to 0.92% in 2022.
Oil Imports
In previous years Bahrain imported significant amounts of crude oil from Saudi Arabia, which it subsequently refined and sold. Crude imports averaged more than $4bn per year through the 2010s, but starting in 2021 Bahrain ceased importing crude, partly due to a drop in demand resulting from the pandemic. In 2021 and 2022 Bahrain imported refined petroleum worth $321m and $122m, respectively. For the energy sector, the kingdom imported around $356m of gas turbines in 2022, up from $176m in 2021 and $273m in 2020.
Key Utilities Players
Independent power producers (IPPs) play a major role in Bahrain, with four contributing to the domestic energy mix as of September 2024 – along with one government power producer. Al Dur 2 is the country’s largest, with four gas turbines and two steam turbines, producing a total of 1500 MW, or approximately 30% of Bahrain’s total capacity. It is 60% owned by Saudi energy producer ACWA Power, 30% by Japanese conglomerate Mitsui and 10% by Bahraini engineering firm Almoayyed Contracting Group. Fully commissioned in 2022, it is also the newest of Bahrain’s IPPs.
The second-largest is Al Dur, which was fully commissioned in 2012 and has a capacity of 1234 MW. It is 45% owned by French utilities firm ENGIE, 25% by GIC, 20% by Kyuden International, a branch of Japanese energy firm Kyushu Electric Power Company and 10% owned by Bahrain’s Social Insurance Organisation (SIO), the country’s state pension fund. The gas-fuelled Al Ezzel power station produces 950 MW and was the largest IPP at the time of its completion in 2007. ENGIE and GIC each own 45% shares of Al Ezzel. Al Hidd power station has a capacity of 929 MW and was completed in 2003. Its operator, Hidd Power Company, is 40% owned by Malaysian energy company Malakoff, with ENGIE and Japanese electricity firm Sumitomo each holding 30% shares.
The Riffa Power Station was completed in 1983, making it the oldest in Bahrain. As of September 2024 Phase one had a capacity of 250 MW, while Phase two had a capacity of 400 MW. This facility is also the country’s only power station wholly owned by the government through the EWA. An additional power station that does not produce electricity for the Bahraini grid is the Alba Power Station, which supplies energy solely to the Aluminium Bahrain (Alba) aluminium smelter (see Industry chapter).
Several of these facilities are also water producers. Hidd Power Company is Bahrain’s largest desalinated water producer, producing 90m imperial gallons per day (MIGD), out of Bahrain’s total production capacity of 213.4 MIGD. It was built in two stages, with four desalination units built in 1999 and 10 built in 2008. Haya Power and Desalination Company, installed in February 2021 and February 2022 and run by the same firms that own Al Dur 2, has Bahrain’s largest capacity per unit, with two units producing 25 MIGD each. Al Dur Power and Water Company, with a capacity of 48 MIGD, is owned by a consortium comprised of ENGIE, GIC, Kyuden International and the SIO.
Meanwhile, Ras Abu Jarjur was commissioned in 1984, and expanded in 1998 and 2006, with a total water production capacity of 16.2 MIGD as of September 2024. This plant is one of two water-producing facilities, together with Hawar, that is owned by the EWA. In December 2023 the EWA released tenders to upgrade this plant and extend its lifespan into the 2040s. Hawar Station is Bahrain’s smallest producer, with units built in 1985 and 2014, producing a total of 0.22 MIGD. In March 2024 the government announced tenders as part of a project to boost the plant’s capacity to 2 MIGD. Alba Power Station, using four units built in 2001, has a total production capacity of 7 MIGD. Alba is owned by government entities, with the Mumtalakat sovereign wealth fund owning nearly 70%, SABIC Industrial Investments Company owning around 20% and the general public 10%.
Utilities Infrastructure
The EWA is the sole off-taker of electricity and water from independent power and water producers. The entity is undertaking a modernisation programme to install extra-highvoltage grids in Bahrain. As of 2023 the country had a total of 1764 km of high-voltage underground cables serving the 33-KV, 66-KV and 220-KV networks, along with 140 km of extra-high-voltage underground cables for the 400-KV network. Notably, no overhead lines are used for power transmission. In September 2023 South Korean organisation Taihan Cable and Solution Company won a $60m turnkey contract to install a 400-KV underground cable system in Al Jasra.
As of 2023 Bahrain’s water distribution network consisted of 618 km of transmission pipes, up from 536 km in 2022. Bahrain also has storage tanks with a capacity of approximately 700m gallons, roughly four times the country’s daily average consumption of 166 MIGD. There are also wells with a 30-MIGD capacity to be used in emergency situations. Alongside capacity expansions, infrastructure quality has improved in recent years. Total leak cases declined from 14,566 in 2018 to 13,451 in 2022. The use of smart meters has more than doubled over the same period, from around 108,000 installed units in 2018 to nearly 290,000 units in 2022.
Apart from its domestic infrastructure, Bahrain is a member of the GCC Interconnection Authority, a partnership that interlinks the power systems of GCC countries. Benefits of this include potential contingency resources of up to 926 MW in emergency situations. In October 2018 Bapco and Saudi Aramco announced the commissioning of a 350,000-bpd oil pipeline from Saudi Arabia to the Bapco Refinery site. This pipeline has been identified as a potential asset for partial privatisation in the coming years as Bahrain opens up its oil industry to foreign investors.
Power & Water Production
According to the International Renewable Energy Agency, in 2021 Bahrain’s energy supply comprised 91% gas and 9% oil. Total annual IPP production rose from nearly 16,500 GWh in 2018 to approximately 18,800 GWh in 2022. Power imports declined from 204 GWh in 2018 to Bahrain exporting 136 GWh in 2022. Natural gas consumption in electricity generation has remained stable at around 6260 cu metres due to the decommissioning of older facilities at Sitra and Riffa Phase one, while more efficient plants such as Al Dur 2 have increased production. The domestic segment is the largest consumer of electricity, using 8733 GWh in 2022, or 47.7% of total usage. Commercial usage totalled 6585 GWh, or 36%, while the industrial sector used 2919 GWh, or 16%. Agriculture accounted for the remaining 56 GWh.
Desalinated water has accounted for 100% of Bahrain’s water since 2016, which totalled 166 MIGD in 2022. Domestic usage accounted for 156m cu metres of water that year, or 75% of the total usage of 202m cu metres. The commercial sector used 40.2m cu metres and the industrial sector used 5.3m cu metres. In August 2024 the EWA commissioned four individual reverse osmosis units in Hamala, a village on the country’s north-western coast. These units have a combined total capacity of 2 MIGD.
Energy Transition
As Bahrain aims to generate 5% of its electricity from renewables by 2025 and 20% by 2035, in February 2024 the country launched a tender for a 100-MW solar project in Al Dur, which is set to be the country’s first utilities-scale solar power project, and the first step in building the 255 MW of generating capacity needed to reach the 2025 target. In addition, a 72-MW solar installation is under construction in Sakhir that will consist of rooftop, ground-mounted, car park solar power systems and electric vehicle charging stations at Bahrain International Circuit, University of Bahrain, Exhibition World Bahrain and Al Dana Amphitheatre. Bapco Energies and Abu Dhabi’s Masdar are also exploring wind projects with a potential capacity of 2 GW.
Similar to its GCC neighbours, Bahrain is expressing interest in carbon capture, utilisation and storage (CCUS) projects. In 2023 Bapco Energies completed a preliminary feasibility study on industrial CCUS projects, with the goal of capturing 20-25% of domestic emissions. Meanwhile, in December 2023 Bapco Energies and Japanese shipping firm Mitsui OSK Lines signed a memorandum of understanding to develop infrastructure to transport liquefied CO₂ to sequestration sites in Bahrain. According to a study by Bapco Energies, Bahrain has enough storage capacity to reach net-zero emissions by 2060. In March 2023 the firm said that it was considering developing the world’s largest CCUS project by using depleted gas reservoirs. The proposed $4bn facility would have a capacity of 10m-12m tonnes of CO₂ per year.
Outlook
With a smaller economy than some of its GCC neighbours, Bahrain faces competition in gas exports from Qatar, and Saudi Arabia’s efforts to localise its hydrocarbons value chain may limit Bahrain’s capacity to import and refine Saudi oil. That said, the April 2024 US loan to develop wells highlights that the Bahraini government intends to optimise its remaining hydrocarbons reserves to finance economic diversification and sustainable development initiatives. At the same time, the rebranding of Bapco Energies and its commitment to diversification should see the kingdom take advantage of the opportunities presented by the energy transition and the race to net zero. Meanwhile, Bahrain’s well-developed corporate legal frameworks, stable domestic political scene and well-maintained infrastructure are likely to become strong foundations on which to develop the non-oil economy.
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