Oil hopes could distract Bahrain from urgent reforms

Subject

Hydrocarbons in Bahrain’s economy.

Significance

A potentially game-changing offshore oil and gas discovery could offer fresh hope for Bahrain’s weak public finances and broader economic woes. The find, announced in April, comes at a time when -- although its recent economic performance has been stronger than anticipated -- there has been medium-term stagnation in some of the sectors at the heart of Manama’s diversification efforts.

Impacts

• Renewed gas production could render obsolete the liquefied natural gas import terminal due for completion in 2019.
• The hope of new oil wealth could support an upgrade in Bahrain’s credit rating and lower borrowing costs.
• Neighbouring Gulf states may be increasingly less inclined to make valuable grants, after reports of newfound oil wealth.