MANAMA (Reuters) - A new 350,000-barrels-per-day oil pipeline between Saudi Arabia and Bahrain will be completed next year to serve the planned expansion of Bahrain’s refinery capacity, while construction of a gas pipeline is being considered, Bahrain’s oil minister said.
Bahrain is in final negotiations with a preferred bidder to expand its only oil refinery and a contract is expected to be awarded before the year-end, Sheikh Mohammed bin Khalifa al-Khalifa said in an interview.
He did not identify the bidder, but sources told Reuters in August that a consortium including TechnipFMC, Samsung Engineering and Spain’s Tecnicas Reunidas had submitted the lowest bid.
The kingdom is also building its first liquefied natural gas terminal, which will allow it to import LNG for domestic use. Saudi Aramco could potentially use the terminal as part of a wider scheme to connect Gulf Arab countries with a gas pipeline, Sheikh Mohammed said.
“With flexibility like that, Saudi Arabia, Kuwait and others will have access to LNG infrastructure in Bahrain, for example. The idea is to eventually have everybody linked up by gas. That is a concept under consideration,” he said.
“But I think the interesting part is that if there was a line between us and Saudi, Aramco can start using the LNG terminal, the one we are building.”
Saudi Arabia does not currently import gas, but its energy minister said last year that it might eventually do so to increase the use of gas in its energy mix.
“If Saudi Arabia opts to use the LNG project, the project could easily be expanded to allow larger LNG imports and a portion of the re-gasified fuel gas would flow by pipeline to Saudi,” said Sadad al-Husseini, a Saudi energy analyst and former executive vice-president at Saudi Aramco.
Bahrain’s gas terminal, expected to be completed in 2019, will have a capacity of 800 million standard cubic feet per day. Bahrain has not yet made a deal to buy gas, but the minister said his country had been talking with Russia.
The project is jointly owned by Bahrain’s Oil and Gas Holding Co (Nogaholding) and a consortium of Teekay LNG Partners, Gulf Investment Corp and Samsung C&T.
Sheikh Mohammed said Bahrain was talking with Kuwait’s Petrochemical Industries Co about the possibility of installing an aromatics plant with the refinery expansion.
Any plans to expand the Abu Safa oilfield, which Bahrain shares with Saudi Arabia, will depend on oil markets, but for the time being there are no such plans, he said. Bahrain now produces 200,000 bpd of oil including output from Abu Safa.
Instead, authorities are looking to increase output from Bahrain’s own oilfield by tapping pre-khuff gas, which is gas located in deep deposits, Sheikh Mohammed said.
Bahrain also has long-term plans for offshore gas exploration. “We are open to it - we are waiting for the market to be right. Now there is a depressed market and you don’t get the best deals ... so we are doing a lot of internal work to prepare.”
Sheikh Mohammed said Bahrain, a small non-OPEC oil producer, would support any decision that the Organization of the Petroleum Exporting Countries took on production policy. He praised the current agreement on production restraint.
“I think the deal was positive - it has brought prices from the 40s to the 50s (dollars per barrel). What we see now is a reduction of inventories ... The unknown is how quickly shale adapts.”
Editing by Andrew Torchia and Dale Hudson