Bahrain: Bahrain Natural Gas Profile

Bahrain has natural gas reserves of about 3.25 trillion cubic feet (Tcf), much of it associated gas from the Awali oil field. The country produced 341 billion cubic feet (Bcf) of natural gas in 2003, all of which was consumed locally. Natural gas production and processing are the responsibility of Bapco Upstream. The largest domestic consumer was Aluminium Bahrain (Alba), which uses natural gas in its power plant. In September 2003, the government signed an agreement with Alcoa, allowing the American company to take up to a 26 percent equity stake in the company. Bapco Upstream awarded a contract in June 2004 to the U.S. engineering firm Foster Wheeler for upgrades to their main natural gas processing facility at Awali.

Bahrain's growing demand for electric power generation (see below) is likely to cause it to become a net natural gas importer in coming years. In January 2002, Qatar and Bahrain signed a Memorandum of Agreement indicating Bahrain's intentions to purchase natural gas from Qatar's North Field Enhanced Gas Utilization Project. After repeated delays, it now appears that it may be 2008 before Bahrain receives the 0.5 - 1 billion cubic feet per day (Bcf/d) that it is seeking. Bahrain also opened negotiations with Iran on possible purchases of natural gas in early 2004.

Bapco has also pursued investment in liquefied natural gas (LNG) projects. In 2002, the country set up a joint venture with the American firm Dynegy to invest in related opportunities in the Middle East and North Africa.

Sector Organization

The Bahrain National Gas Company (Banagas) was established in 1979 to capture associated natural gas at the Awali oilfield that had previously been flared. Bahrain formed Banagas to process associated gas into marketable products and supply residual gas for local industrial use. Banagas is three-quarters state-owned, with the remainder owned by the Arab Petroleum Investment Corporation (APIC) and Caltex Bahrain (Chevron) at 12.5 percent each.

Production and Consumption

Bahrain consumes all of its natural gas production domestically in power plants, enhanced oil recovery (EOR) projects, or in heavy industry, where natural gas is used as a feedstock. The largest domestic consumer of natural gas is Aluminum Bahrain (Alba), which is one of the largest aluminum smelters in the world. Alba also operates a large natural gas-fired power plant. Banagas operates a two-train gas processing plant, which has the capacity to process 300 million cubic feet of gas per day. The processing plant extracts propane, butane and naphtha from associated gas (from oil wells) at the plant. Liquefied propane and butane are transferred to refrigerated storage tanks located at the Sitra port for ship loading, while naphtha is sent to the Bahrain Petroleum Refinery (Bapco) for storage and subsequent export.

Natural gas demand in Bahrain has grown rapidly in recent years and is expected to continue to do so in the coming years as a result of greater natural gas requirements for power plants and energy-intense domestic industry. To help meet rising demand, NOGA is leading an effort to increase the country's natural gas supply. Over the last five years, annual production has grown by an average of 5 percent, however Bahrain will need to increase its natural gas production more significantly to keep up with the rising demand. In the interim, the government is seeking out supply agreements with neighboring countries.