Bahrain’s Bapco approaches banks for $5bn refinery expansion

State-run Bahrain Petroleum Company (Bapco) has approached banks to sound their appetite for the financing needed to back the capacity expansion of the existing Sitra oil refinery, a project expected to cost well in excess of $5bn, sources familiar with the matter said.

The company, advised by BNP Paribas and HSBC, has sent a so-called “teaser” to commercial banks for a loan likely to be over $1bn.

The rest of the project cost will be covered with equity coming from the company, expected to exceed $1bn, and with debt facilities backed by export credit agencies (ECAs), of at least $3bn.

The company is in advanced talks with ECAs including Italy’s SACE, Britain’s UKEF, Spain’s CESCE and the Export-Import Bank of Korea, said the sources.

Bapco did not immediately respond to a request for comment.

Bahrain, a small non-OPEC Gulf oil producer, relies on output from the Abu Safa field that it shares with Saudi Arabia for the vast majority of its oil.

It announced this week its largest ever oil discovery, off the coast, estimated to have at least 80 billion barrels of tight oil, and deep gas reserves in the region of 10-20 billion cubic feet.

But the country’s oil minister said this week in Manama that it was not clear yet how much of the estimated volume would be recoverable.

Read: Bahrain’s new oil discovery may exceed 80 billion barrels

The refinery expansion, part of the Bapco Modernisation Programme, will boost the capacity of the Sitra oil refinery to 360,000 barrels per day from the current 267,000 barrels.

Bapco awarded late last year $4.2bn in contracts for the project to a consortium of firms comprising TechnipFMC, Samsung Engineering and Spain’s Tecnicas Reunidas.

Bahrain is working on a new 350,000 barrels per day oil pipeline between it and Saudi Arabia to serve the planned expansion of the country’s refinery capacity.