Bahrain to Invest $2 Billion on Capacity Expansion of Sitra Refinery

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Researched by Industrial Info Resources (Sugar Land, Texas)--State-controlled Bahrain Petroleum Company (Awali, Bahrain) has announced that it will invest about $2 billion to augment the capacity of the Sitra refinery. The current capacity of the refinery complex, which is the country's largest, is about 250,000 barrels per day (BBL/d). The expansion is expected to boost the refinery's capacity to 350,000-400,000 BBL/d.

The announcement comes at a time when most oil-rich countries in the Middle East are deferring new project investments or cutting back on capacity augmentation plans for existing projects. However, Bahrain has indicated that despite the economic slowdown and the slump in oil prices, it will go ahead with the proposed plan and take advantage of the declining costs of raw material and construction. Industry experts state that the present economic climate is set to affect refining margins for several years and also force countries to close old refineries.

The Sitra plant, built in 1936, is one of the oldest refining complexes in the Gulf Cooperation Council. The refinery receives one-sixth of its feed from the oil fields in Bahrain, while the rest comes from Saudi Arabia. Hence, sustained crude oil feed from the Abu Saafa oil field in Saudi Arabia is critical for the proposed expansion.

The Sitra refinery has a 54-kilometer pipeline, which runs 27 kilometers underseas and 27 kilometers over land, before reaching the northwestern region of Bahrain. Bahrain and Saudi Arabia plan to replace the existing pipeline with a new 114-kilometer long pipeline network at an estimated cost of $350 million. The new pipeline will have a capacity to carry 350,000 BBL/d of crude. Feasibility studies are under way and are expected to be complete by the end of this year. The new pipeline is set to begin operations by the end of 2011.

In another development, Bahrain's National Oil and Gas Authority (Manama, Bahrain) has announced that Occidental Petroleum Corporation (NYSE:OXY) (Los Angeles, California), in association with the Mubadala Development Company (Abu Dhabi, United Arab Emirates), will invest $1.5 billion to develop oil and gas fields in Bahrain over the next five years. This project is expected to boost the output of the Awali offshore oil field from the present 35,000 BBL/d to 100,000 BBL/d.

Established in 1929, Bahrain Petroleum was a fully owned subsidiary of Caltex Petroleum Corporation (Dallas, Texas), which was then a joint venture between The Texas Company, now known as Texaco (Bellaire, Texas), and Standard Oil of California, now Chevron Corporation (NYSE:CVX) (San Ramon, California). Texaco is currently a part of Chevron.

In 1981, Caltex sold a stake of 60% in Bahrain Petroleum to the government of Bahrain. In 1997, the government took over complete ownership of the company. The firm is presently engaged in the entire petroleum product life cycle, starting from exploration to refining and distribution. The company also operates 170 storage sites with a combined capacity of 14 million barrels. It exports more than 90% of its refined products to Africa, Southeast Asia and the Far East.

Bahrain has limited oil and gas reserves compared with other countries in the Middle East. For the past few years, the country, which is largely dependent on its oil and gas sector for revenues, has been consciously working toward developing other sectors such as financial services and metals. However, the hydrocarbon sector continues to be a major contributor to the country's economy, bringing in 60% of the nation's revenues and accounting for 11% of Bahrain's gross domestic product. According to The World Fact Book, published by the Central Intelligence Agency (Washington, D.C.), Bahrain had proven oil reserves of 124.6 million barrels and gas deposits of about 92.03 billion cubic meters as of January 1, 2008.

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