In the balance: How Bahrain should align its natural gas supply and demand balance

Bahrain

Deloitte partner Kenneth McKellar gives his view of how Bahrain should align its natural gas supply and demand balance. McKellar is responsible for managing multi-disciplinary teams across professional services company Deloitte’s advisory and accounting options for energy clients.

Most of Bahrain’s solutions to its limited gas supply – the country consumes as much as it produces, some 13 bcm (459 bcf) – have come from the supply side in attempts to increase production from the Bahrain oilfield. The country is a well-established market, but its oilfields are mature. Because of their fragile nature, technologies must be brought in that protect the lifespan of the wells and are able to increase production.

SUPPLY OPTIONS: Other options that address looming natural gas shortages on the supply side include building a gas pipeline with its neighbours Saudi Arabia or Qatar, though it is unlikely either country will contract any remaining supply. Saudi Arabia’s gas supply is fully allocated to domestic use while Qatar is already supplying the UAE through the 426-kilometre Dolphin Pipeline. Bahrain has made public its intentions to pursue imports of LNG via an offshore regasification unit. As of May 2013, no announcement had been made on who will be providing the infrastructure and where the gas will come from. Because LNG imports seem to be the most rational near-term option for increasing domestic gas supply, Bahrain must act quickly to establish a coherent strategy for energy pricing.

DEMAND SIDE: To address the pricing issue of natural gas imports, Bahrain’s best chance is to pursue a policy that balances energy supply and demand. By implementing regulations that limit further gas consumption, it can discourage over-consumption of the resource. One such mechanism for demand-side reforms is through price signals to the residential and industrial sectors. Of Bahrain’s electricity generation, 100 percent is fuelled by natural gas now. If the electricity price better reflected the price of the underlying fuel used to generate each kilowatt-hour, perhaps citizens and industry alike would be more conscious of their consumption patterns.

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