Complex Made Simple

Bahrain sitting on billions of dollars it didn’t know existed

Bahrain is inviting the whole world for the party of the century because of their offshore shale oil discovery at the Khaleej Al Bahrain Basin.

The oil find currently dwarfs the reserves they had of 100,000 barrels of oil.

According to Knoema, a company specializing in providing data technology products and services, some 80 billion barrels of shale oil could be extracted, and based on current oil prices of $70, this can potentially translate into $560 billion.

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They also discovered gas, but we will get to that in a bit.

If Saudi had made a similar finding, there would be some form of celebration but with 260 billion barrels of existing reserves, it won’t make headline news.

But this will, especially that Bahrain owes mountains of money with 2017 debt to GDP at 91% as reported by Trading Economics.

Not good.

SOS, just in the nick of time

Bahrain has been in serious trouble for the past few months, and no one was willing to save them.

Their national debt was expected to surpass 100% in the incoming year.

As a last resort, Bahrain started issuing debt instruments.

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The Bahraini government stopped the issuing last week, when investors showed little interest in the low yields the country was proposing.

After splitting the bonds into three maturity tranches, investors felt more encouraged and the country was able to raise $1bn in a mix of treasury bonds and Islamic Sukuk.

All eyes on Bahrain

If any investor had any doubts before the discovery and felt he or she needed more incentives to invest, today’s business prospects have grown quite a few notches.

Low or high yields, investors now have a new found friend: Bahrain and we expect the market to start moving as soon as companies begin bidding for the shale extraction.

But that’s not all.

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What about the gas?

Near the same location, Bahrain also discovered around 13.6 trillion cubic feet (cf) of gas.

At gas prices around $171 per 1000 cf, this translates into potentially another $235 billion.

Let the party begin.