The Middle East | 1 Feb 2013
Having commenced 2013 with a number of new and noteworthy industrial projects in both private and public sectors, Bahrain should be able to continue to diversify its portfolio and expand its industrial base.
In terms of recent public projects, there are three sizable investments in the pipeline expected to come to market between the fourth quarter of 2013 and the first quarter of 2014: $4.8bn in funds for expansion and modernisation efforts at the Bahrain Petroleum Company (BAPCO); $2.5bn for new developments at Aluminium Bahrain (Alba); and $1.2bn for the Gulf Petrochemical Industries Company (GPIC).
The BAPCO Modernisation Programme (BMP), which originally planned to inject $8bn-11bn in new projects through joint ventures, will now proceed with a $4.8bn target to be financed through bonds and sukuk offerings. The company is currently appointing an advisory bank to oversee the financing.
The major components of the BMP include a reconfiguration of the Sitra refinery and an expansion of the Arabia-Bahrain (AB) pipeline. The new design will enable BAPCO to increase production of 267,000 barrels per day (bpd) to more than 450,000 bpd. Front-end engineering design (FEED) was complete by the end of 2012, and engineering, procurement and construction is expected to open by February. Initial construction should begin by the first quarter of 2014 and work should be finished by 2018.
“The BMP is set to be the single-largest capital investment in the history of BAPCO, as well as that of the Kingdom of Bahrain,” Adel Khalil Almoayyed, the chairman of BAPCO, told OBG.
In the second of the Kingdom’s recent industrial developments, Alba, which hosts the world’s fourth-largest aluminum smelter, announced in December that it had hired Bechtel Canada to carry out a feasibility study for its $2.5bn smelter expansion project, the firm’s sixth. The new smelter line should be complete by early 2015, and will add some 400,000 tonnes of annual capacity to current production of around 881,000 tonnes per year.
Alba also announced in early January it had received two bank loans to refinance a $169m bond, which is set to mature in March 2013. According to a recent statement on the Bahrain Stock Exchange, Alba obtained a five-year, $85m loan from Gulf International Bank and another three-year, $84m loan from a group of banks, including the Ahli United Bank, the National Bank of Bahrain, the Bank of Tokyo-Mitsubishi UFJ, the Bank of Bahrain, and the Kuwait and Arab Banking Corporation.
The potential $1.2bn injection for GPIC could provide a strong boost for the petrochemicals company after an already profitable 2012. According to Abdulrahman Jawahery, president of GPIC, last year the firm produced around 1.5m tonnes of ammonia, methanol and urea and exports exceeded the estimated quantity by 1.1m tonnes, highlighting the growing regional and international demand for petrochemicals.
The efficacy of each of these investments, however, is predicated on long-term, low-cost natural gas contracts between each firm and the sovereign. The government will most likely have to prioritise investments amongst each company with respect to potential profitability.
Regarding foreign direct investment (FDI) and industrial investments from the private sector, several projects have emerged that highlight regional demand for manufacturing, which grew 13% in the first quarter of 2012 over the last quarter of 2011, according to the Bahrain Economic Development Board’s second-quarter 2012 economic outlook (the most recent available). The board expects manufacturing growth to pick up further this year.
The polymer industry leads the way, with German firm BASF, the world’s largest diversified chemical company, opening the doors to its new manufacturing facility at the Bahrain International Investment Park (BIIP) in late December 2012.
JBF Industries, an Indian polyester firm, commenced construction of its 65,000-sq-metre facility in July 2012 and is due to go into production in March 2013, according to the Ministry of Industry and Commerce. Hassan A Fakhro, the minister of industry and commerce, told OBG that the new plant is expected to provide 300 jobs and will have a production capacity of 90,000 tonnes of polyester per annum.
In November 2012, Germany-based industrial firm RMA launched its new $18m RMA Middle East SPC facility at the BIIP. RMA’s pipeline manufacturing is expected to create more than 100 jobs in the Kingdom and stimulate downstream business for local companies.
The FDI of these three foreign firms amounted to $200m over the course of 2011, and with the assistance of the Economic Development Board, it is expected that more than 500 jobs will be created over the next three years.