Bahrain may raise gas prices again

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Bahrain may increase natural gas costs for local consumers again to narrow the gap between domestic and international market prices, Bahraini Energy Minister Abdul Hussein bin Ali Mirza told Reuters.

Subsidy-slashing move

Aluminium Bahrain (Alba), the small island nation's biggest gas consumer, faces a government-ordered rise in gas costs from US$1.50 per million British thermal units (mmbtu) to US$2.25/mmbtu on Jan. 1, 2012.

"This is the situation now. If the situation demands it, then we will take action. The price of gas is low compared with international prices," Mirza told Reuters when asked about any possible further gas price rises.

"So we wanted to gradually adjust the price so we are not burdened in the future with international prices without raising the local prices... when the time comes, we will decide."

Analysts say the subsidy-slashing move is overdue for an energy intensive industry which has thrived on huge price subsidies prevalent in the Middle East that many observers say must be phased out to encourage investment in gas exploration, reduce imports and discourage waste.

The 75-cent rise in Bahrain gas prices planned for the start of 2012 is equivalent to the total cost enjoyed by industrial consumers in neighboring Saudi Arabia.

But the higher cost is still only a fraction of the US$17/mmbtu buyers in Asia are currently paying for liquefied natural gas (LNG), the super-cooled gas which Bahrain is increasingly likely to need, to meet its future demand.

Looking further

Bahrain's rising gas production has struggled to keep up with buoyant demand for gas for power generation and heavy industry, forcing the non-OPEC minor oil producer to look further afield for its future gas needs.

Any gap between domestic prices and future import costs will likely have to be paid from government funds.

Mirza said Bahrain had received nine bids from companies hoping to build an LNG import terminal in the tiny country, which sits between the world's biggest crude oil exporter Saudi Arabia and leading LNG exporter, Qatar.

"We have received nine bids and we are evaluating these, from different companies, Shell... all the major ones are there," he told reporters in Manama.

Mirza said in July, Bahrain may have to look as far as Russia to meet growing demand for gas as supply talks stall with its neighbors.

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