Bahrain Mirror: An economic find said that Bahrain's onshore oil reserves, which the US Energy Information Administration (EIA) estimates at 125 million barrels, will last less than 7 years at the current rate of production.

The find published on CPI Financial website stated that the amount of reserve in Awali oil field, and not the production Bahrain shares with Saudi Arabia from Abu Safa oil field, has not been identified yet.

Commenting on the effect of new oil discovery on Bahrain's economy that basically depends on oil production and export, the find mentioned that, based on EIA research, the average recovery factor for tight oil deposits ranges between 3% and 6% of the initial oil in place.

This factor, which governs technical recoverability of an oil reservoir, could be closer to the lower end of the range in the case of Bahrain because the new discovery is located offshore, below the seabed and hence its recoverability is likely to be technically more challenging and more costly.

Using a recovery factor of 3% as a plausible assumption, Bahrain's new oil find could eventually yield up to 2.4 billion barrels of recoverable oil reserves.

This number would allow Bahrain to double its current total crude oil production for the next 33 years, provided the cost of recovery is also determined to be economical.

Bahrain's current account deterioration has driven the large erosion of foreign exchange reserves from a peak of $5.8 billion at the end of 2014 to a low of $1.3 billion in July 2017. The reserves have since recovered somewhat on the back of large sovereign external bond issuances. However, the find added that the foreign reserves of $2.8 billion at the end of November covering only 1.4 months of imports of goods and services and less than 10% of Bahrain's short-term external debt, and considered that the pressure on Bahrain's pegged exchange rate regime is now at its highest since the formal peg of the riyal to the dollar was introduced in 2001.

The find didn't expect new oil production to impact Bahrain's economic and fiscal metrics for at least another five years. In the meantime, the kingdom's credit profile will remain the weakest among GCC peers and the most vulnerable, fiscally and externally, to potential declines in oil prices.

Arabic Version