Petroleum refining, begun modestly in 1942, was Bahrain's first modern industrial enterprise. By 1976 the oil refinery at Sitra had reached its current capacity of about 250,000 barrels per day, far above local daily production rates of 35,000 barrels per day from the single active field at Awali, and about 86% of the oil is pumped from Saudi Arabia by sea and land lines. The refinery was owned and operated by the government-owned Bahrain Petroleum Company (BAPCO), which in a consolidation, which began in January 2000 and was completed on 1 June 2002, merged with the upstream state company, Bahrain National Oil Company to form Bahrain Petroleum Company (BSC). BSC will hence be charged with exploration, production, refining, marketing, and distribution of Bahraini oil for domestic use and the international market. Although modernization was delayed by the Gulf conflict, work began in 1992 to expand refining capacity to some 360,000 barrels per day. Much of the refurbishment has, however, been concentrated more on quality improvements than increases in quantity, and though in 1999 a record production rate was attained of 262,000 barrels per day, in January 2002 refinery capacity was estimated at 248,900 barrels per day by the US Department of Energy. Before it merged into the BSC, BAPCO announced a $900 million modernization program that involves adding supplemental hydrocracking facilities. Achieving additional refinery capacity has shifted to the proposed construction of a second refinery, with a 500,000 barrels per day capacity, to be constructed by the Saudi firm Petroma. To date, however, the deal, though not formally cancelled, has been delayed for lack of financing. In 1999, a seven-year, $800-million modernization plan started upgrading the refinery. Output was recorded at 260,000 barrels per day in 1999.
A government-controlled aluminum industry, Aluminum Bahrain BSC (ALBA), was launched in 1971 with an original smelter capacity of 120,000 tons annually; the successful completion of a 1997 expansion project increased production to more than 500,000 metric tons in 1998. It is the world's second-largest aluminum smelter, and is 77%-owned by the government.
A gas liquefaction plant was opened by the Bahrain National Gas Co. (BANAGAS) in 1979. The Bahrain National Oil Company (BANACO) was planning to spend $60 million in 1999 on new gas projects. The Arab Shipbuilding and Repair Yard, a pan-Arab industrial venture undertaken by OAPEC, became operational in 1977. It is the Gulf's largest floating dock and repair facility, with expansion scheduled for 2000 involving up to $200 million.