meed-logo

line1 line2 line3
SIGN IN / REGISTER

Foreign policy issues cloud Bahrain’s horizon

8 November 2023

MEED’s December 2023 special report on Bahrain also includes: 

> Bahrain waits for major infrastructure projects
> Bahrain takes renewables strides
> Bahrain charts pathway to net-zero future
> Bahrain banks have cause for cheer

 

Bahrain’s Sheikh Khalid bin Hamad al-Khalifa, first deputy chairman of the Supreme Council for Youth & Sports and head of the Bahrain Olympic Committee, flew into Doha on 28 October to watch his compatriots take on Japan in the final of the Asian Men’s Handball Qualification Tournament for the 2024 Paris Olympics.

Sheikh Khalid was welcomed on arrival by Qatar's Sheikh Thani bin Hamad al-Thani in what was another sign of the ongoing process of rapprochement between the two countries, following the 2017-21 boycott of Qatar by Bahrain, the UAE and Saudi Arabia.

The rebuilding of the bilateral relationship has been a slow process. Indeed, Bahraini officials complained on several occasions in 2022 that Qatar had repeatedly declined to take up its offer of talks.

However, the process picked up momentum in early 2023, with several meetings at the headquarters of the Gulf Co-operation Council in Riyadh. In mid-April, the two sides agreed to restore full diplomatic relations, although they have yet to reopen embassies or appoint new ambassadors.

Regional tensions

Other foreign policy issues are causing greater diplomatic headaches these days. As one of the two Gulf countries to sign normalisation deals with Israel, Bahrain has found itself in a difficult position in light of the Hamas attack on Israel on 7 October and the subsequent heavy bombardment of Gaza by Israeli forces.

That issue rose to the fore on 2 November, when the Council of Representatives issued a statement saying the Israeli and Bahraini ambassadors to each other’s country had returned home and there had been a “cessation of economic relations”.

This was initially taken by many commentators to mean that diplomatic relations had been broken off, but the reality appears to be a suspension rather than a formal severance of ties. The Bahrain government subsequently issued a statement confirming its ambassador to Tel Aviv had returned home “some time ago” and the Israeli ambassador to Manama had also left. There had been protests outside the embassy since the Hamas-Israel war began.

In addition, direct flights between Bahrain International airport and Tel Aviv airport “stopped as of several weeks ago”, Manama said.

However, the statement made no mention of diplomatic relations being cut. The Israeli government meanwhile said that bilateral relations were “stable”.

However, there is clear potential for the war to escalate and the Bahrain-Israel relationship to worsen. Speaking at the 10th emergency special session of the UN General Assembly on 1 November, Bahrain’s ambassador to the UN, Jamal Fares al-Ruwaei, warned about the risks that Israel’s bombing of Gaza could radicalise a new generation. “Such scenes of death and destruction can create entire generations filled with accumulated anger and thirst for vengeance,” he said.

The authorities in Manama will be watching closely in case future protests against Israeli actions include explicit challenges to the Bahrain regime itself.

Economic headwinds

On the economic front there have also been challenges. Italian energy major Eni recently pulled out of the offshore Block 1 licence it secured in May 2019. An exploratory well was drilled on the block in mid-2021.

Bahrain has also yet to make any significant progress on the Khaleej al-Bahrain offshore field, which was discovered in April 2018.

In a more positive development, a $7bn upgrade of the Bapco refinery is due to enable a ramp-up of production to about 380,000 barrels a day by mid-2024, which should bolster government revenues, though there have been some reports of delays.

Bahrain’s headline real GDP growth estimate for 2023 has meanwhile been curbed to 2.7 per cent in the latest update from the Washington-based IMF, down from an estimate of 3 per cent in April. This is down from an estimated 4.9 per cent growth in 2023 and comes amid an extension of Opec+ oil production cuts. Real GDP is forecast to rise back to 3.6 per cent in 2024.

Although high oil prices have bolstered the country’s fiscal position over the past two years, the government has also had to continue trimming public spending to bring its budget closer to balance. In 2023, Bahrain is running an estimated fiscal deficit of 5 per cent of GDP.

Capital Intelligence sovereign analyst, Dina Ennab, predicts the budget deficit will fall to 5 per cent of GDP in 2023, compared to 6.1 per cent in 2022. It could fall further, to 3.6 per cent of GDP by 2025, “provided the government continues to contain public spending and improves revenue mobilisation”, she wrote in a mid-October ratings review.

This is still a far larger deficit than the government has been aiming for. In early June, the government issued its two-year budget for 2023-24 and said it was targeting a deficit of less than 1 per cent of GDP in 2024.

Under the Fiscal Balance Programme launched in 2018, the government had initially aimed to balance its books by 2022, but the year before that deadline – and amid the Covid-19 pandemic and lower oil revenues in 2021 – it pushed the target date back to 2024.

The government’s forecast revenues of BD3.1bn ($8.2bn) in 2023 and BD3.5bn in 2024 are based on a conservative target of oil prices averaging $60 a barrel. The IMF estimates that the country will need an oil price of $108.3 a barrel to balance its budget this year, falling to $96.9 a barrel in 2024 – both figures are by far the highest in the GCC.

Should instability spread around the region, there could be the sort of spike in oil prices that would, in theory, bring the budget into balance, but the wider geopolitical and macroeconomic consequences would almost certainly be broadly negative for Bahrain and neighbouring countries.

Image: Sheikh Khalid bin Hamad attends Olympiad qualifier in Doha. Credit: Bahrain News Agency

https://image.digitalinsightresearch.in/uploads/NewsArticle/11276847/main.gif
Dominic Dudley

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • UAE to withdraw from Opec and Opec+ alliance

    28 April 2026

    The UAE has announced its decision to withdraw from Opec and the Opec+ alliance from 1 May.

    In a statement, the UAE Ministry of Energy said the move followed a “comprehensive review” of its production policy.

    “While near-term volatility, including disruptions in the Arabian Gulf and the Strait of Hormuz, continues to affect supply dynamics, underlying trends point to sustained growth in global energy demand over the medium to long term,” the statement, issued on 28 April, said.

    “This decision follows decades of constructive cooperation. The UAE joined Opec in 1967 through the Emirate of Abu Dhabi and continued its membership following the formation of the United Arab Emirates in 1971. Throughout this period, the UAE has played an active role in supporting global oil market stability and strengthening dialogue among producing nations.”

    The announcement was timed to coincide with an Opec ministerial meeting in Vienna and was communicated through state news agency Wam.

    Abu Dhabi National Oil Company (Adnoc) has set a target of raising production capacity to 5 million barrels a day (b/d) by 2027 – up from a current capacity of around 4.85 million b/d, though the country has been constrained to producing approximately 3.4 million b/d under Opec+ quota agreements.

    Membership of a quota-constrained group sits uneasily with that ambition. The non-oil economy now accounts for roughly 75% of the UAE’s GDP, reducing the political cost of rupture with the organisation.

    The Iran war wiped out 7.88 million b/d of Opec production in March, cutting group output 27% to 20.79 million b/d – the steepest supply collapse in the organisation’s recorded history, exceeding the Covid-19 demand shock of May 2020 and the disruptions of both the 1970s oil crisis and the 1991 Gulf War. Gulf producers have been struggling to route exports through the Strait of Hormuz amid Iranian threats and attacks on vessels, further straining the group’s cohesion.

    Against that backdrop, the UAE’s departure deals a significant blow to Opec and its de facto leader, Saudi Arabia, which has sought to project unity despite persistent internal disagreements over quotas and geopolitics.

    The US-Israeli war on Iran since late February has had a detrimental effect on a number of Gulf states, including the UAE.

    The UAE was targeted by thousands of Iranian ballistic missiles and drones, damaging strategic oil and gas facilities, denting Dubai’s appeal as a luxury tourism hotspot and slowing oil exports to a trickle.

    Whereas some Gulf states have urged dialogue with Iran, the UAE has maintained a more hawkish position. Analysts say that position is partially due to its reliance on the Strait of Hormuz for oil exports and the UAE’s unwillingness to see Iran cement itself as a regional power in the Gulf.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16596229/main.gif
    Indrajit Sen
  • NWC tenders package 14 of sewage treatment programme

    28 April 2026

     

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s National Water Company (NWC) has tendered a contract for the construction of 10 sewage treatment plants as part of the next phase of its long-term operations and maintenance (LTOM) sewage treatment programme.

    According to the original scope, the Eastern A Cluster (LTOM14) package will have a total treatment capacity of 184,440 cubic metres a day (cm/d) at an estimated cost of $180m.

    The bid submission deadline is 30 September.

    The tender follows recent contract awards for North Western A Cluster Sewage Treatment Plants Package 11 (LTOM11) and the Northern Cluster Sewage Treatment Plants Package 10 (LTOM10).

    MEED exclusively reported that a consortium comprising China’s Jiangsu United Water Technology, the UAE’s Prosus Energy and Saudi Arabia’s Armada Holding had been appointed as a contractor for each of these projects.

    Package 11 will have a combined capacity of about 440,000 cm/d at an estimated cost of about SR211m ($56.3m).

    Package 12 will have a combined treatment capacity of 337,800 cm/d at an estimated cost of about SR203m ($54.1m).

    In April, NWC also opened finanical bids for North Western B Cluster (LTOM12) of its sewage treatment programme.

    The contract covers the construction and upgrade of seven sewage treatment plants with a combined capacity of about 162,000 cm/d.

    MEED previously reported that the following companies had submitted proposals:

    • Alkhorayef Water & Power Technologies (Saudi Arabia)
    • Civil Works Company (Saudi Arabia)
    • Miahona (Saudi Arabia)
    • Beijing Enterprises Water Group – BEWG (Hong Kong)
    • Al-Yamama (Saudi Arabia)

    These bids are currently under evaluaton, with an award expected in the coming weeks, a source said.

    The tender for the North Western C Cluster (LTOM13) project had been put on hold, although it is understood that this is now likely to be the next package to be tendered.

    Under the original scope, this package covers the construction of 10 sewage treatment plants.

    In total, the LTOM programme comprises 19 packages split into two phases. This contract for LTOM10 was the first to be awarded under the second phase of NWC’s rehabilitation of sewage treatment plants programme.

    As MEED understands, there have been several discussions in recent months regarding changes in scope details and potential expansions. This involves potentially grouping some upcoming projects.

    NWC previously awarded $2.5bn-worth of contracts in the first phase. This comprises nine packages covering the treatment of 4.6 million cm/d of sewage water for the next 15 years. Phase two of the programme includes 10 packages covering 117 treatment plants.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16591851/main.jpg
    Mark Dowdall
  • Construction begins on Aman Dubai Hotel and Residences

    28 April 2026

    Dubai-based developer H&H Development and Switzerland’s Aman Group have broken ground on the Aman Dubai Hotel and Residences project in Dubai’s Jumeirah area.

    The project’s enabling works contract has been awarded to local firm Swissboring.

    Foundation works are expected to start this quarter.

    The developers said ground improvement works have now been completed. Another local firm, DBB Contracting, carried out the works.

    The project comprises a hotel, 78 branded residences and villas.

    Singapore-headquartered architectural firm Kerry Hill Architects is the project consultant.

    Dubai real estate developments continue to dominate the UAE’s construction market, with schemes worth more than $323bn either under execution or in planning.

    This aligns with a GlobalData forecast that the UAE construction sector will grow by 3% in real terms in 2026, supported by infrastructure, energy and utilities, and residential projects.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16591687/main.jpg
    Yasir Iqbal
  • Regional war deepens Kuwait oil sector’s tender crisis

    28 April 2026

    Commentary
    Wil Crisp
    Oil & gas reporter

    Contractors in Kuwait expect the regional conflict and disruption to shipping to worsen the country’s existing oil and gas tendering problems, causing long-term disruption in the sector.

    In the months prior to the US and Israel attacking Iran on 28 February, contract tenders worth an estimated $9.1bn were cancelled after bids came in above the projects’ allocated budgets.

    Contractors largely blamed the cancellations on long delays to tender processes after budgets had been set.

    The delays, which often extended for several years, meant inflation drove up the cost of materials and labour, making it almost impossible for contractors to submit bids within the original budgets.

    One industry source said: “The reason all of these contracts were cancelled was because the tender processes for large projects had started moving again after stalling for a long time.

    “Bids came in and unfortunately they were over budget. It was then expected that tender processes would restart and these projects would ultimately be awarded – but now the war means that Kuwait is facing a whole new wave of project delays and nobody knows when it is going to end.”

    War impact

    Many industry insiders believe delays caused by the war and the closure of the Strait of Hormuz will once again seriously disrupt projects, just as many stakeholders believed the country was about to see an uptick in project progress.

    One source said: “Bid bonds are going to have to be renewed and some bidders might just use that as an opportunity to drop out of the bidding process.

    “It’s also possible that work that has already been done, like feasibility studies, will no longer be relevant and will have to be repeated.”

    2025 rebound

    Last year, Kuwait recorded its highest total annual value for oil, gas and chemicals contract awards since 2017, according to data from regional project tracker MEED Projects.

    A total of 19 contract awards with a combined value of $1.9bn were awarded.

    This was more than four times the value of contract awards across the same sectors in 2024, when awards were worth just $436m.

    It was also above the $1.7bn peak recorded in 2021, but it remained far lower than the values seen in 2014-17, when several large-scale, multibillion-dollar projects were awarded in the country.

    The surge in the value of contract awards came after Kuwait’s emir indefinitely dissolved parliament and suspended some of the country’s constitutional articles in May 2024.

    Prior to the suspension of parliament, Kuwait suffered from very low levels of project awards for several years amid political gridlock and infighting between the cabinet and parliament.

    This meant important decisions about projects could not be made – a major obstacle to the progression of strategic oil projects.

    Forward outlook

    With several major oil and gas projects under development in late 2025 and early 2026, some expected 2026 to record a far higher volume of oil and gas contract awards than 2025.

    Projects expected to be tendered – and potentially awarded – this year included a $3.3bn onshore production facility due to be developed next to the Al-Zour refinery.

    This project has already been delayed and put on hold as a result of fallout from the US and Israel’s conflict with Iran.

    Had it been awarded, it would have been the biggest single oil and gas contract award in Kuwait in more than 10 years.

    Now, as a result of the conflict, many of the large tenders expected to take place this year are likely to be significantly delayed.

    One source said: “Right now, everyone in the oil and gas sector is waiting for some sort of sign of improving stability before they make a decision and there’s a lot of uncertainty.

    “The state-owned oil companies aren’t communicating with contractors like they normally do and the price of a lot of materials has increased dramatically.”

    Even if the standoff between the US and Iran over reopening the Strait of Hormuz is resolved in the near future, it is likely to take months or years before Kuwait’s oil and gas project market regains the momentum it had at the beginning of 2026.

    Given the lack of flexibility within Kuwait’s existing tendering system, delays can easily lead to tenders being cancelled, and the conflict’s inflationary impact will make it even harder for contractors to meet budgets set before the latest disruption.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16590560/main0421.png
    Wil Crisp
  • Partners launch feed-to-EPC contest for Duqm petchems project

    27 April 2026

     

    Register for MEED’s 14-day trial access 

    Omani state energy conglomerate OQ Group and Kuwait Petroleum International (KPI), the overseas subsidiary of Kuwait Petroleum Corporation, have initiated a feed-to-EPC competition among contractors to develop a major petrochemicals complex at Duqm.

    Under a feed-to-EPC model, the project operator selects contractors to carry out front-end engineering and design (feed). It then awards the engineering, procurement and construction (EPC) contract to the contractor with the most competitive feed proposal, while compensating the other contestants for their work.

    OQ8, the 50:50 joint venture of OQ and KPI, is understood to have issued the tender for the Duqm petrochemicals project’s feed-to-EPC competition in mid-March, with a deadline of 6 May for contractors to submit proposals, sources told MEED.

    Several local and international contractors based in Oman are believed to be participating in the competition, according to sources.

    OQ Group CEO Ashraf Bin Hamad Al-Maamari and KPI’s CEO Shafi Bin Taleb Al-Ajmi signed an agreement on 3 February, during the Kuwait Oil & Gas Show and Conference, to develop a major petrochemicals-producing complex in Oman’s Duqm. The parties did not disclose details at the time.

    ALSO READ: Duqm petrochemicals revival provides fillip to Gulf projects market

    The agreement represented a significant step forward in Oman and Kuwait’s long-held plans to jointly develop a petrochemicals complex next to the existing Duqm refinery, which will benefit from favourable feedstock access and strong cost competitiveness.

    The planned facility will also benefit from  in Al-Wusta governorate, along Oman’s Arabian Sea coastline.

    OQ8 had struggled to make meaningful progress on the Duqm petrochemicals project since the plan was conceived as early as 2018, for a variety of reasons.

    The original plan for the Duqm petrochemicals facility, estimated at $7bn, centred on a mixed-feed steam cracker with a capacity to produce 1.6 million tonnes a year (t/y) of ethylene. The project also included a polypropylene (PP) plant with a capacity of 280,000 t/y and a high-density polyethylene (HDPE) plant with a capacity of 480,000 t/y.

    The complex was also expected to include an aromatics plant, as well as storage facilities for naphtha and liquefied petroleum gas (LPG).

    The project’s prospects were temporarily boosted when Saudi Basic Industries Corporation (Sabic) expressed interest in investing by signing a non-binding memorandum of understanding with OQ in December 2021.

    Reuters reported in December that Sabic was withdrawing from the project, leaving OQ to look for other partners. The new agreement between OQ and KPI is understood to have followed the Saudi chemical giant’s departure.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16577785/main.jpg
    Indrajit Sen