Shanghai Metal Market
Bahrain Increases Gas Prices for Aluminum Producer
Edited by : AL CIRCLE
2 min read
Bahrain is to increase natural gas prices for one of its biggest consumers, Aluminum Bahrain (Alba), from 2012 in a subsidy-slashing move analysts say is overdue in the Middle East and may mark the start of a trend towards international price levels.
Many energy intensive industries in the Middle East have thrived on huge gas price subsidies that industry observers say should be phased out to encourage investment in regional gas exploration and discourage waste.
From from Jan. 1, Bahrain's state run energy supplier will raise the price of gas it supplies to Alba by $0.75 per million British thermal units (mmbtu) to $2.25/mmbtu, Alba said on Wednesday. This will increase Alba's costs significantly while still offering the plant cheaper fuel than most of its competitors outside the region.
"If the notified price increase takes effect, Alba expects that it would result in an increase of approximately US$85 million in Alba's cost of sales for the year 2012 based on its expected production level," Alba said in a statement.
Analysts say that the big subsidies prevalent in the Middle East are unsustainable because these prices are often lower than the cost of production of non-associated gas reserves.
Gas demand in the small Gulf oil producing country has grown rapidly in the last few years, pressing the island nation to find new sources to feed its refining and aluminum smelting businesses.
The National Oil and Gas Authority of Bahrain (NOGA) has started a comprehensive study of long-term natural gas supply and demand in the kingdom and is considering establishing a new gas pricing structure after 2012, Alba said.
Many energy intensive industries in the Middle East have thrived on huge gas price subsidies that industry observers say should be phased out to encourage investment in regional gas exploration and discourage waste.
From from Jan. 1, Bahrain's state run energy supplier will raise the price of gas it supplies to Alba by $0.75 per million British thermal units (mmbtu) to $2.25/mmbtu, Alba said on Wednesday. This will increase Alba's costs significantly while still offering the plant cheaper fuel than most of its competitors outside the region.
"If the notified price increase takes effect, Alba expects that it would result in an increase of approximately US$85 million in Alba's cost of sales for the year 2012 based on its expected production level," Alba said in a statement.
Analysts say that the big subsidies prevalent in the Middle East are unsustainable because these prices are often lower than the cost of production of non-associated gas reserves.
Gas demand in the small Gulf oil producing country has grown rapidly in the last few years, pressing the island nation to find new sources to feed its refining and aluminum smelting businesses.
The National Oil and Gas Authority of Bahrain (NOGA) has started a comprehensive study of long-term natural gas supply and demand in the kingdom and is considering establishing a new gas pricing structure after 2012, Alba said.
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