Bahrain’s gross government debt could reach 102 percent in 2019 from 94.9 percent this year as the smallest oil producer in the Gulf struggles with one of the highest breakeven crude oil price levels globally, the International Monetary Fund said in the May edition of its Regional Economic Outlook for the Middle East and North Africa.
Bahrain will need oil to trade at US$113 a barrel this year if it wants to break even, second only to Libya, which needs oil at US$132 a barrel to make ends meet. In 2019, the breakeven price for the tiny kingdom will be US$110.6, according to International Monetary Fund calculations.
Bahrain has become a regular international borrower in a bid to stymie the decline in its foreign exchange reserves amid the oil price collapse. These fell to US$2.4 billion in 2016 at the height of the crisis and last year improved to US$2.7 billion, only to fall in 2018 to US$2.5 billion and further to US$2.3 billion in 2019.
The numbers suggest that despite projections for positive GDP growth, Bahrain, like its neighbors, needs to enact economic reforms to reduce its dependence on oil. However, this is easier said than done. After a failed bond offering in March, Bahrain announced that it had made the biggest oil discovery in its history, which would “dwarf” its current reserves. Bahrain has proved reserves of around 125 million barrels of crude.
The new discovery—a shale oil and gas play—was said to contain an estimated 80 billion barrels of crude and 10-20 trillion cubic feet of natural gas, but as the kingdom’s energy minister admitted, it was still unclear what portion of this giant deposit was technically recoverable. This dampened enthusiasm around the discovery.
The IMF has warned that despite continued GDP growth in the region, oil exporters need to accelerate reforms to avoid the adverse effects of a potential global financial market tightening and deepening trade tensions in the region.
By Irina Slav for Oilprice.com
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Bahrain is the smallest oil producer in the Gulf currently producing some 210,000 barrels a day (b/d). Its proven reserves amount to 125 million barrels. Without financial support from Saudi Arabia, Bahrain’s economy would have been in a worse shape.
However, there is a glimmer of hope for Bahrain. The huge discovery in west Bahrain announced in early April this year is estimated to hold more than 80 billion barrels of oil and between 10 and 20 trillion cubic feet of natural gas according to the Bahraini oil minister Sheikh Mohammed bin Khalifa Al-Khalifa.
If the reserves are proven, they will certainly be a game changer for Bahrain’s economy. Moreover, Bahrain could apply to become a member of OPEC.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London