Oil ‘must hit $138 for stable Bahrain budget’

Manama / Tribune News Service

Oil prices must reach $138 per barrel for Bahrain to be able to balance its budget, according to a senior official. The rate is higher than those required by other GCC nations, said Energy Minister Dr Abdulhusain Mirza.
He was speaking at a symposium, The Decline in Oil Prices and their Impact on the GCC Countries, at the Regency InterContinental Hotel, Manama. Seven experts spoke at the forum, organised by Ahlia University under the patronage of Dr Mirza.
“According to the Deutsche Bank and International Monetary Fund, the oil prices must reach $138 per barrel for Bahrain to be able to balance its budget,” said Dr Mirza. “For Qatar it is $77, Kuwait $78, the UAE $81 and Saudi Arabia $104. “Iraq will need $101pb with Libya being the only country that needs a rate higher than Bahrain, at $184pb.”
GCC countries were on the right track in tackling the effect of tumbling oil prices by introducing austerity measures, including lifting subsidies, he said. “Actions taken by the GCC countries, including Bahrain, include restructuring and ultimately lifting all direct general subsidies. “Almost all the GCC nations have started implementing these actions.
“A plan to introduce VAT (value-added tax) system in 2018, to partially finance government spending is underway – the GCC countries are assessing the need and time to implement this,” said Dr Mirza. “We have special task forces to ensure maximising revenues and controlling costs and this has led to Bahrain achieving a 30pc reduction in government expenditure.
“We have also started drawing up plans to diversify our economies to reduce dependence on oil.” The impact of plunging oil prices has had a major effect on government revenues, said Dr Mirza. “Currently, Bahrain’s field production is 50,000 barrels of oil per day.
“Every $1 drop in the price translates into a $73m fall in revenues per annum. “Bahrain’s public debt has risen to BD7.1bn ($18.84bn) in 2015 from BD1.3bn ($3.45bn) in 2009 – in 2014 it was BD5.4bn ($14.32bn). “Even Standard and Poor’s downgraded Bahrain’s rating from -BBB to BB.” Government action to tackle this situation is focused on two aspects. “It focused on reducing government expenditure and implementing subsidy reforms. “The government created six special task forces to implement cost cutting and we achieved reducing it by 30pc.”
Dr Mirza underlined the need for the GCC to have national energy sustainability strategy. “We need to adopt energy sustainability strategy that will involve the use of solar and wind energy. “We are working on a sustainable energy unit (SEU) as part of our efforts towards this.
“SEU is a national focal unit set up by the Cabinet in September 2014 which involves a National Energy Efficiency Action Plan, developing a Feed-In-Tariff, encouraging investment in renewable energy and ensuring compliance with regional and international obligations.
“The strategy has three goals – to increase production, reserves and revenues, to conserve and rationalise energy and to find alternatives for oil and gas.” Topics discussed at the forum included Causes and Consequences of the decline of oil price, Learning to live with the low oil price in the GCC and alternative economies using networked Small and Medium Enterprises.