Bahrain’s cabinet has decided to raise prices of natural gas sold to companies, official news agency BNA reported in a sign that the government is seeking ways to save money as the plunge of global oil prices pressures state finances.
The price of natural gas sold to industrial users will be unified and raised gradually from April 1, BNA reported without specifying the size of the increases. The cost of natural gas used to generate energy for industrial projects will also rise.
The cabinet “stressed that the readjusted natural gas prices for power generation will not affect citizens nor will it have an impact on Bahrain’s competitiveness or its ability to lure investors in the industrial sector,” BNA said.
Government officials were not immediately available to comment on the report.
State subsidies keeping gas prices down are a major drain on the government’s budget; 35 companies including Aluminium Bahrain benefit from natural gas subsidies worth BD610 million ($1.62 billion) annually, the Gulf Daily News quoted officials as saying last year.
Bahrain’s state finances are weaker than those of neighbouring Gulf oil exporters, so low oil prices threaten its budget.
Last September, when Brent crude was at $97 a barrel, analysts surveyed by Reuters projected the kingdom would run a state budget deficit of 5.7 per cent of gross domestic product in 2015. Brent is now at $49, so the deficit may turn out to be much bigger.
Reducing subsidies is politically sensitive, however. In December 2013, the National Oil and Gas Authority said it would gradually raise the domestic selling price for diesel fuel, almost doubling it by 2017. But the plan was suspended after protests by some members of parliament.