Key View: We see gas consumption gradually increasing through our long term forecast period as the government implements its strategy to minimise consumption of higher value refined fuels. We expect natural gas consumption to rise at an average year on year rate of 2.0% through our long term forecast period, reaching 25.75bcm by 2031. All of Bahrain's gas production is consumed domestically, with power and industrial demand set to drive gas consumption over the forecast period. Though LNG imports are yet to commence as of early 2022, the new LNG terminal, inaugurated in 2020, will ensure the country can meet summer peak demand over the decade and boost latent domestic consumption.
Bahrain has successfully promoted gas use domestically in order to minimise consumption of its more valuable domestically produced fuels. We forecast that gas consumption will increase at a stable 2% yearly average over our 10-year forecast period to support the country's industrial expansion.
All of Bahrain's gas production is consumed domestically (for power generation) and by its industries. Aluminium Bahrain (Alba) is the country's largest industrial consumer and in 2019, it doubled its production capacity, becoming the world's largest gas consumer. The Sitra refinery is also a large gas consumer, and this is expected to increase as a refinery expansion programme is going forward. Gas is also used for reinjection into Bahrain's ageing oil fields in order to maintain production rates (about 25–30% of produced gas is not marketed but reinjected). According to statistics provided by the National Oil and Gas Authority, gas consumption in 2018, the Electricity Authority and other private electricity providers accounted for some 44% of marketed gas consumption in Bahrain in 2018, followed by Alba which consumed some 28% of marketed gas, Bahrain Petroleum at 10%, Gulf Petrochemical Company at about 8%, and other smaller consumers, such as SULB Company BSC, Bna Gas, Gulf Investment Company.
Demand is set to remain strong, with notably rising demand from the power sector. Plans to expand domestic ammonia, urea and methanol production provide additional upside risk to demand, should these plans progress. We forecast gas consumption to reach 25.7bcm by the end of our forecast period to 2031, with risks lying to the upside.
As Bahrain is currently making sizable efforts to boost production and increase recovery levels from the mature Bahrain field, further gas will be needed for gas reinjection in the coming years. However, given the limited potential for a large increase in gas production at the Bahrain field, the country has settled for import capabilities with LNG imports to make up for insufficient domestic production. This in order to satisfy its long-term domestic gas demand.
We expect that the new LNG import terminal will provide more flexibility for gas imports into Bahrain and therefore enables an expected increase in consumption, independent of gas production. Since May 2019, the terminal is technically ready for commercial operations, providing Bahrain with its first gas import option. LNG imports are yet to commence as of early-2022, despite the 2020 inauguration of the new LNG terminal. While no official reason has been given for the delay, it could be due to the lack of commercial supply agreements. We include LNG imports in our forecasts from 2022, which will tap into latent domestic demand for gas and will help serve summer peak demand over the decade. However, we note that if Bahrain manages to sufficiently boost production from the Bahrain field, the need for LNG imports may be pushed back further into 2023-2024.
Gas Price Increase
According to the Bahrain News Agency, the country's cabinet has raised the price of gas sold to industrial users. According to Energy Minister Abdulhussain Mirza, natural gas has risen from USD2.25/mn BTU in April 1 2017 to eventually reach USD4/mn BTU in 1 April 2021. There are 35 companies that benefit from natural gas subsidies, of which Alba is by far Bahrain's biggest gas consumer.