The Gateway Gulf investor forum showcased $26bn of infrastructure projects that need private sector investment

For the past three years, the challenge for governments across the region has been reducing expenditure while at the same time delivering the projects needed to maintain their economies’ competitive edge.

The solution is for the state to partner with the private sector and, after much talk and planning, the first wave of projects to be delivered with private investment are ready to move forward. As these projects progress towards implementation, the challenge is marrying investors with the government authorities tasked with delivering new projects.

In a proactive move, Bahrain hosted the Gateway Gulf investor forum from 8-10 May, to showcase $26bn of infrastructure projects from the region that require private sector investment. Of the $26bn total, there were investment-ready projects worth $18bn, with another $8bn of projects in the earlier planning stages.

Bahrain was leading the charge, and Manama is launching more infrastructure projects as it drives economic growth in the kingdom. “We are launching a plethora of projects, initiatives and RFPs [requests for proposal] to continue to stimulate the growth we have seen over the past three years, which has been quite impressive here in the kingdom,” said Bahrain Crown Prince Salam bin Hamad al-Khalifa (pictured above) during the opening session of the event.

Bahrain has been pushing ahead with major schemes despite the general slowdown in project activity across the region following the drop in oil prices.

Manama is also fast-tracking substantial public and private sector investment projects worth more than $32bn across the manufacturing, logistics, infrastructure, healthcare, education and tourism sectors.

This public-private sector investment in projects consists of $10bn of government funding, $7.5bn under the GCC Development Fund and $15bn-worth of investment in the private sector. These projects have driven economic growth. Compared to the rest of the region, where growth has either been negative or sluggish, Bahrain’s real GDP grew by an estimated 3.88 per cent in 2017 to reach BD12.41bn ($33bn).

Oil & gas

The sector attracting the most interest in Bahrain is oil and gas. On 1 April, Manama announced that it had made its largest oil discovery since 1932. The reserves are located in the Khalij al-Bahrain basin covering 2,000 square kilometres in shallow Gulf waters off the kingdom’s west coast, and are estimated to contain more than 80 billion barrels of oil.

There are plans to increase output from the existing Bahrain field, which has been in operation since the 1930s, and Manama is in talks with US-based Schlumberger about co-investing in enhanced oil recovery techniques for the field.

Bahrain also plans to develop the Pre-Khuff gas resource below the Bahrain field. Haliburton is in talks to work on Pre-Khuff, and once the negotiations are concluded it will drill six wells in two to three years.The Pre-Khuff is in two formations, Jubah and Jauf, with reserves of anywhere between 10 and 20 trillion cubic feet (tcf). The recovery rate is expected to be more than 5 tcf of gas.

Other projects include the Bapco refinery expansion, which will boost revenues by $1bn. Bapco signed a $4.2bn contract with a consortium of foreign engineering contractors for its modernisation and expansion project earlier this year. Once complete, the refining capacity is expected to reach 400,000 barrels a day (b/d), from the current 267,000 b/d output.

Another ongoing project is a liquefied natural gas (LNG) import terminal with a capacity of 6 million tonnes, which is being built next to Khalifa bin Salman Port.

To help investors take part in oil and gas projects, Bahrain is setting up a $1bn private equity fund. The National Oil & Gas Authority (Noga) is working with Osool, which manages the pension fund in Bahrain and the Securities & Investment Company (Sico), to set up the Bahrain Energy Fund.

Power & water

Power and water projects are also being planned and delivered to meet growing demand. Bahrain’s installed capacity for electricity is 3,921MW, while water production capacity is 186 million gallons a day. Peak usage spiked in August last year, when demand reached 3,572MW of power and 166 million gallons of water.

Although there is spare capacity, demand is forecast to almost double over the next 15 years, and in response Manama plans to manage both the demand and supply side, while at the same time diversifying its energy mix.

“We were using almost 100 per cent natural gas for production of electricity and water,” said Minister of Electricity & Water Affairs Abdul Hussain bin Ali Mirza. “The government decided to establish a National Centre for Renewable Energy & Energy Efficiency. We call it the Sustainable Energy Unit. It concentrates on encouraging investment in renewable energy and improving energy efficiency.”

For capacity building, $4bn will be spent over the next five years on various projects. These include the Al-Dur 2 power plant, and a 400kV transmission and distribution network. In the longer term, Bahrain aims to generate 5 per cent of electricity, equivalent to 250MW, from renewable sources by 2025, and 10 per cent by 2035.

The plans for using renewable energy are part of two action plans prepared by the Ministry of Electricity & Water Affairs. The National Renewable Energy Action Plan covers solar, wind and waste-to-energy power, while the National Energy Efficiency Action Plan aims to increase energy efficiency by 6 per cent.

Social housing

Social housing is another priority. Minister of Housing Basim bin Yaqoob al-Hamer says the ministry is aiming to increase private sector participation in the development of housing for Bahraini citizens.

The private sector has been a strategic partner in providing housing services in Bahrain for several years. In 2012, the Housing Ministry signed its first public-private partnership (PPP) agreement worth BD208m with private developer Naseej to build more than 2,400 housing units in two areas of Bahrain: the Northern City and Al-Lawzi.

In 2015, the ministry signed a BD276m deal to buy 3,100 housing units from local developer Diyar al-Muharraq.

The units at Diyar al-Muharraq were made available under the government’s Mazaya social housing financing scheme, whereby an individual goes to the bank and obtains a loan with a government guarantee and a government subsidy. Once the loan is processed the applicant can then purchase a home from a government-approved developer.

Tourism & real estate

Tourism and real estate schemes are also being developed and planned. Large-scale masterplanned projects such as Diyar al-Muharraq are well advanced, while several other schemes are still in the early planning stages.

The largest of the planned schemes is a strip of resorts and residential properties located in Bilaj al-Jazayer on the southwest coast of the island, as part of a new development masterplan that is expected to cost billions of dollars to deliver.

It will be anchored by two government-backed resort projects. The rest of the land will be developed by private sector investors. One of the properties is the Al-Sahel Resort and the plan is to complete the first phase within two years.

Away from infrastructure, Bahrain is also looking to attract investment in startup businesses in the kingdom. Bahrain Development Bank has launched a $100m venture capital ‘fund of funds’ to support startups in Bahrain and the rest of the region.

The Al-Waha fund of funds will invest in venture capital funds that have a presence in Bahrain.

As well as providing capital to regional startups, Bahrain expects the fund to help attract additional venture capital funds to the kingdom and enhance the local startup ecosystem.