Bahrain Mirror (Reuters): 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, with the link due to be operational in 2018, Bahrain's Energy Minister said on Thursday.

Bahrain relies on output from the Abu Safa oil field that it shares with Saudi Arabia for the vast majority of its oil and the new pipeline will replace an ageing 230,000 bpd link and enable Bahrain Petroleum Company (Bapco) expand the processing capacity of its 267,000 bpd Sitra refinery.

Eventually the new pipeline's capacity could be increased to 400,000 bpd, Abdul-Hussain bin Ali Mirza said at a signing event in Manama.

"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, adding that the old pipeline was likely to be removed from service in the second half of 2018.

Arabian Light crude oil will flow from Saudi Aramco's Abqaiq plant via the 115-kilometre pipeline, 73 kms of which will run overland and the rest under the Gulf.

Agreements to build the pipeline were signed with Saudi Arabia's Al Robaya Holding Company and National Petroleum Construction Company of the United Arab Emirates.

The former will complete onshore engineering, procurement and construction (EPC) work in Saudi as well as conducting engineering and procurement work in Bahrain. The latter has been awarded an EPC contract for the offshore work.

A contract for construction at the Bahrain end of the pipeline has yet to be awarded, according to a statement from Bapco.

The cost of the pipeline will be met by nogaholding, an investment vehicle which holds the Bahraini government's oil and gas assets.

The new pipeline has been long talked about. Mirza told Reuters in March the pipeline would be ready in 2018, after officials had previously estimated completion by the third quarter of 2016.