EconSource: Bahrain, Saudi Arabia Sign Contracts Worth $300 Million for New Oil Pipeline

Saudi Arabia and Bahrain have signed contracts worth around $300 million to lay a new 350,000 barrel per day (bpd) oil pipeline between the two countries, Bahrain’s Energy Minister Abdul-Hussain bin Ali Mirza said on Thursday. The pipeline is due to be operational in 2018. Officials had previously estimated it would be completed by the third quarter of 2016. Bahrain relies on output from the Abu Safa oilfield that it shares with Saudi Arabia for the vast majority of its oil. The new pipeline will replace an ageing 230,000 bpd link and enable the Bahrain Petroleum Company to expand the processing capacity of its 267,000 bpd Sitra refinery. Eventually, the new pipeline’s capacity could be increased to 400,000 bpd. “It will be finished by the end of 2017 or early 2018 and then there will be a six-month trial period for the new pipeline,” said Mirza. [Reuters, 9/17/2015]

IMF staff concludes visit to Egypt
A delegation from the International Monetary Fund (IMF) concluded its visit to Egypt on Thursday, led by IMF Mission Chief for Egypt Chris Jarvis. The delegation recommended that Egypt adopt flexible a exchange rate, implement a value-added tax (VAT), and further cut energy subsidies. The IMF also approved of measures taken by the government to reduce the deficit and by the Central Bank to curb the currency parallel market, according to a press release issued on Thursday. “There have been positive economic developments since the mission’s last visit in Egypt,” the press release read. However, the mission highlighted several challenges facing Egypt’s economic growth, including high unemployment, a large fiscal deficit, and high domestic public debt. “The mission welcomes the authorities’ plans to pursue fiscal and structural reforms in order to put public debt on a downward-trending path and encourage private sector credit, thereby supporting growth and employment. Lower fuel and electricity subsidies, combined with the implementation of the VAT, would go a long way toward improving the strength of the budget,” the mission said. [Ahram Online, 9/17/2015]

Kuwait revenues drop by nearly half on oil price slide
Kuwait said Thursday that its government revenues have dropped by nearly half since April as a result of the global slump in crude oil prices. Kuwait’s Finance Ministry said revenues dropped 42.5 percent in the first five months of 2015 to 7.3 billion dinars ($24.2 billion). Oil receipts, which accounted for 94 percent of total revenues, slid at a similar rate, the ministry added. Kuwait is projecting a deficit of 7 billion dinars in this fiscal year, after posting a budget surplus for the past sixteen years. Despite Kuwait’s fiscal reserves, the ministry warned this summer the country is facing a “very difficult financial situation.” Kuwait’s 2015-2016 budget forecasts spending cuts of about 17 percent. Kuwait liberalized the prices of diesel, kerosene, and aviation fuel earlier this year and is considering lifting subsidies on petrol and electricity. [AFP, 9/17/2015]

Demand grows for oil trade finance in Middle East, banks say
Banks say they are seeing increased interest in trade finance from Middle East oil companies, especially in Egypt, as cash flows dry up due to lower oil prices. Trade finance can be used to provide working capital to producers and traders, or to allow them to borrow against the value of future output. “In the Middle East, previous liquidity is no more and if you’re a refinery or oil company you have debt on your balance sheet and can refinance that using this [trade finance],” said Emre Karter, Citigroup’s Head of Treasury and Trade Solutions for Middle East, North Africa, Pakistan, and Turkey. Interest in trade finance is particularly strong in Egypt and Iraq, he said. On Thursday, the National Bank of Abu Dhabi (NBAD) agreed to the latest of two large finance deals with Egyptian energy companies, both of which could include trade finance. Jean-Christophe Desaintfuscien, Executive Director and Global Head of Energy and Commodities Traders at NBAD, said the bank had seen a rise in demand from Egypt for oil and structured trade since expanding its energy and resources business eighteen months ago. [Reuters, 9/17/2015]

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