Bahrain’s biggest oil and gas discovery in more than 80 years could prove a game-changer for the region’s smallest economy saddled with high levels of public debt and a widening deficit, economists said.
“It is a game-changer ... a milestone, no doubt,” said Jasim Husain, a Bahraini economist and a former member of parliament.
On Sunday the island kingdom, which lies offshore Saudi Arabia, said it discovered sizeable volumes of tight oil and gas off the west coast, which are expected to outsize current reserves.
Bahrain was the first among its GCC peers to discover fossil fuel in 1932, and was also one of the earliest to start running out of oil. Maturing reserves prompted an early diversification programme, with Bahrain developing one of the world’s biggest aluminium smelters as well as a solid regulated financial industry in the 1970s. However, the rise of competing regional hubs such as Dubai and falling output put the brakes on economic growth. The three-year slump in oil prices hit Bahrain hard, prompting downgrades from all three credit ratings agencies, which have rated the kingdom below investment grade.
A reviving hydrocarbons sector could bode well for its investment outlook, particularly at a time when Bahrain seeks to position itself as a more business-friendly hub.
“It could really improve the credit ratings in Bahrain, which is what we’re looking forward to, because now it’s currently in the negative,” said Mr Husain.
“It could change the outlook to stable and positive, but that’s yet to be seen really."
The discovery comes at a time when Bahrain’s external borrowings to GDP are inching dangerously close to 90 per cent. The economy is also heavily reliant on support from fellow members of of the GCC, mainly its bigger neighbour Saudi Arabia as well as the UAE for funds to help with infrastructure spending.
"Down the road, this discovery would translate into stronger revenues for the budget and that means really, that Bahrain would have more money to spend on infrastructure," said Mr Husain. "It would [also] be a chance for the authorities not to transfer some of the costs on to the public, because people have been asked to pay, to share some of the burden.”
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Read more:
Bahrain makes biggest oil discovery since 1932
Bahrain to start tight gas development this year
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He did not expect to see a postponement of 5 per cent VAT in Bahrain, which has yet to announce a timeline for its implementation.
On Monday, BMI, a Fitch subsidiary, revised estimates for Bahrain’s economic growth to 3.7 per cent and 3.4 per cent for 2018 and 2019 from the earlier 2.9 per cent, as rising oil prices lower the government’s urgency to consolidate fiscal accounts.
BMI's latest revisions are higher than those projected for the medium term by the country's own state investment agency, the Bahrain Economic Development Board. In December, the board said it forecast growth to remain at about 3 per cent in the medium term, with the economy expected to have expanded about 3.1 per cent over the previous year.
Jean-Paul Pigat, head of research at Lighthouse Research, based in the UAE, said the discovery could not have come at a better time for its economy.
“It’s going to take time to develop these resources before you start seeing an improvement on the fiscal or external position,” said Mr Pigat. But compared with other countries regionally, “Bahrain’s economy has actually been outperforming over the past year”, he added.
While Mr Husain was optimistic over Bahrain’s ability to use its as yet unexplored hydrocarbons find to secure financial commitments, Mr Pigat cautioned against more borrowings for an already debt-saddled economy.
“What matters the most in the coming months is that Bahrain secures commitments of external financial support, as that would be the true ‘game changer’,” said Mr Pigat. “For the economic backdrop, this would ideally come alongside a broader reform plan that can help with diversification efforts. More foreign borrowing is not the answer to the economy’s problems.”
Normal People
Sally Rooney, Faber & Faber
Martin Sabbagh profile
Job: CEO JCDecaux Middle East
In the role: Since January 2015
Lives: In the UAE
Background: M&A, investment banking
Studied: Corporate finance
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
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A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
UAE currency: the story behind the money in your pockets
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
Honeymoonish
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THE BIO
Favourite author - Paulo Coelho
Favourite holiday destination - Cuba
New York Times or Jordan Times? NYT is a school and JT was my practice field
Role model - My Grandfather
Dream interviewee - Che Guevara
More from Janine di Giovanni
The Breadwinner
Director: Nora Twomey
Starring: Saara Chaudry, Soma Chhaya, Laara Sadiq
Three stars
MIDWAY
Produced: Lionsgate Films, Shanghai Ryui Entertainment, Street Light Entertainment
Directed: Roland Emmerich
Cast: Ed Skrein, Woody Harrelson, Dennis Quaid, Aaron Eckhart, Luke Evans, Nick Jonas, Mandy Moore, Darren Criss
Rating: 3.5/5 stars
ICC Awards for 2021
MEN
Cricketer of the Year – Shaheen Afridi (Pakistan)
T20 Cricketer of the Year – Mohammad Rizwan (Pakistan)
ODI Cricketer of the Year – Babar Azam (Pakistan)
Test Cricketer of the Year – Joe Root (England)
WOMEN
Cricketer of the Year – Smriti Mandhana (India)
ODI Cricketer of the Year – Lizelle Lee (South Africa)
T20 Cricketer of the Year – Tammy Beaumont (England)
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
MATCH INFO
Uefa Champions League final:
Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports
FA Cup quarter-final draw
The matches will be played across the weekend of 21 and 22 March
Sheffield United v Arsenal
Newcastle v Manchester City
Norwich v Derby/Manchester United
Leicester City v Chelsea
Rashid & Rajab
Director: Mohammed Saeed Harib
Stars: Shadi Alfons, Marwan Abdullah, Doaa Mostafa Ragab
Two stars out of five
