Bapco moves to call $484m of bond guarantees as refinery dispute goes to arbitration

The Bapco Modernisation Programme — a $4.2bn lump-sum turnkey EPC contract awarded in December 2017 to a consortium led by France's Technip with South Korea's Samsung Engineering and Spain's Tecnicas Reunidas — was originally expected to complete in 2022. It would lift Bahrain's Sitra refinery, the country's only refining asset with units up to 75 years old, from 267,000 barrels a day toward 400,000. Bahrain's government has put the wider programme's cost at around $7bn.

The scheme was officially inaugurated in December 2024, but MEED reported that full commissioning and start-up were still pending, with Bapco Energies' group CEO saying total completion could take up to another year. Then came war: missile and drone strikes on the Sitra refinery in March and April 2026 forced Bapco Energies to declare force majeure, pushing the finishing works out further while the consortium remained on site.

By 2026 the relationship had gone legal. The joint venture initiated arbitration 'to protect its rights'; Bapco moved to execute the project's performance guarantees, and on August 4, 2026 the High Court of England and Wales allowed the state refiner to call guarantees worth $484m. The builders had already answered: in June, execution of the guarantees was halted in Spain, France and South Korea — the partners' home jurisdictions. On August 10, Tecnicas Reunidas told the Madrid exchange that no JV member had paid and that it expected no impact beyond what was already in its half-year accounts.

Bapco won court leave to execute $484m of performance guarantees; the JV faces the calls while arbitration and settlement talks continue.

A fixed-price turnkey structure put schedule risk on the builders of a 90-year-old refinery; when the 2022 date slipped, the contract's enforcement machinery — guarantees and arbitration — took over.

The client chose escalation: rather than settle, it pursued guarantee execution in England and Wales, turning a delay dispute into a cash call worth nearly half a billion dollars.

The consortium's counter-strategy froze execution in all three home jurisdictions while continuing to build and talk — preserving cash but hardening positions on both sides.

Force majeure from the March and April 2026 strikes on Sitra added fresh delay and gave each side new arguments about who owes what.

Performance bonds are the sharpest escalation tool in project contracts: the client turns a dispute into cash calls; the contractor's only shield is freezing orders in every home jurisdiction.

As of August 2026 the joint venture is still executing EPC works on the programme while arbitration proceeds and settlement talks run in parallel; no guarantee payments had been made. The refinery's modernised units are being brought online in stages, but MEED reported full commissioning was still outstanding after the December 2024 inauguration. The UK ruling leaves Bapco with the legal right to call the $484m guarantees the moment the foreign-court blocks lapse — leverage that hangs over every settlement conversation.