Bahrain’s proven natural gas reserves stood at 3.25 trillion cubic feet (Tcf) as of January 2008, much of it associated gas from the Awali oil field. In 2006, the country produced and consumed 390 billion cubic feet (Bcf) of natural gas.

The Bahrain National Gas Company (Banagas) was established in 1979 to capture associated natural gas at the Awali oilfield that had previously been wasted. Banagas was formed by Amiri Decree with the primary objectives of processing the associated gas into marketable products and supplying residue gas for local industrial use. Banagas is 75-percent owned by the Bahrain government, 12.5-percent by the Arab Petroleum Investment Corporation (APIC) and 12.5-percent by Caltex Bahrain (Chevron).

All of Bahrain’s natural gas production is used domestically, either 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 the largest aluminum smelter in the world. Alba also operates a large natural gas-fired power plant. Banagas operates a gas liquefaction plant, which produces approximately 3,000 bbls/d of propane, 2,700 bbls/d of butane and 4,500 bbls/d of Naphtha. Liquefied propane and butane are transferred to refrigerated storage for ship loading at the SitraWharf, while naphtha is sent to the Bapco for storage and subsequent export.

Natural gas demand in Bahrain is expected to grow in the coming years as a result of greater natural gas requirements for power plants and domestic industry. To help meet rising demand, Bapco is leading an effort to increase the company’s natural gas supply by 500 million cubic feet per day (MMcf/d), a 53 percent increase from 2004 levels. In 2006, Bapco approved plans to invest a reported $200 in drilling 10 new onshore natural gas wells. Bapco plans to introduce new natural gas production incrementally over the next several years, including improving the natural gas recovery rates at existing fields. On March 5, 2008, Bapco signed an agreement with ExxonMobil to carry out a technical analysis of Bahrain’s natural gas sector to be completed in 4 months.

Bahrain has also pursued natural gas supply arrangements with neighboring countries. In 2001, Bahrain signed an initial agreement with Qatar for the supply of 500 million cubic feet per day (MMcf/d) of piped natural gas from Qatar’s massive North Field. However, the agreement was not finalized, and Qatari officials extended a moratorium on new natural gas developments in its North Field until at least 2010. Plans for an integrated petrochemicals, power and water project by Kuwait Finance House and Bahrain have also been set back by the lack of agreement on natural gas supplies. The visit of Iran’s president Ahmadinejad in November 2007 produced a memorandum of understanding for the supply of 1 MMcf/d of Iranian natural gas. In February, 2008, Dr. Mirza said the latest meeting of the joint committee had focused on which Iranian gas field would provide the supply to Bahrain, and on the means of transporting the gas. Also under discussion, according to Dr. Mirza, was whether Bahrain would invest in the development of the assigned gas field, or buy the gas once it had been extracted by Iran. National Iranian Oil Company (NIOC) is understood to have earmarked the offshore Farsi gas field as the source for future exports to Bahrain (see the Iran Country Analysis Brief for more information).