Bahrain, Saudi Arabia Finalize Details of $350 Million, 100-Kilometer Oil Pipeline

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Researched by Industrial Info Resources (Sugar Land, Texas)--Bilateral talks between Bahrain and Saudi Arabia are under way to finalize details on the construction of a new Bahrain-Saudi oil pipeline. The 100-kilometer pipeline, to be built for about $350 million, is expected to transport 350,000 barrels per day (BBL/d) of crude oil upon completion.

The new pipeline has been planned as a replacement for an existing line with a capacity of 230,000 BBL/d. However, the pipeline will follow a different route, avoiding the congested regions of the terrain. Pipeline design specifications and route details are likely to be part of the ongoing discussions.

The venture is a part of Bahrain's initiative to improve the overall local energy scenario, including development of hydrocarbon resources in the region at an estimated total investment of $20 billion, with $15 billion earmarked for oil and gas exploration and the balance $5 billion for upgrading infrastructure at the refinery of The Bahrain Petroleum Company BSC (BAPCO) (Awali, Bahrain).

The country has plans to gradually increase oil production to 100,000 BBL/d during the next two decades. To this effect, National Oil and Gas Authority (NOGA) (Manama, Bahrain) has entered into a development and production sharing agreement with Mubadala Development Company (Abu Dhabi, United Arab Emirates) and Occidental Petroleum Corporation (NYSE:OXY) (Los Angeles, California) to jointly explore the onshore Awali fields. Occidental Petroleum, Mubadala and NOGA will hold stakes of 48%, 32% and 20%, respectively, in the joint venture.

The Awali fields are reported to have proven resources worth 125 million barrels, which will be explored through additional rigs and 3,600 new oil wells during the next 20 years. A combination of eight drilling rigs and an equal number of work-over rigs will be employed to augment the production capacity of the fields. A second offshore venture is also being considered. Gas exploration projects are also in the cards, with bidders ready to unearth opportunities in the Pre-Khuff region.

Meanwhile, BAPCO, as part of a $100 million venture, already has completed drilling operations on three of the eight planned gas wells in the Khuff reservoir. Four wells with associated gas dehydration facilities are expected to be commissioned by 2010.

These development ventures are expected to help Bahrain double oil production to 75,000 barrels per day (BBL/d) in about five years. The country is also planning to increase daily natural gas output from the present levels of 1.7 billion cubic feet to 2.5 billion cubic feet.

BAPCO's 250,000-BBL/d refinery at Sitra has been upgraded with the latest technology at an investment of about $1.2 billion, including a low-sulfur diesel production unit, which desulfurizes diesel to meet quality and environmental specifications. The unit has a production capacity of 60,000 BBL/d. Expansion of the Sitra refinery also will be based on the amount of crude oil flowing into the country through the new Bahrain-Saudi oil pipeline since only one-sixth of the refinery's crude oil feed is derived from local sources.

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