Place an .htaccess file in the location directory with the following:
RewriteEngine On
RewriteRule (.*) ../index.php?location=$1&e=1 [L,QSA]
This assumes that the index.php that you want to use for requests to /location is located in the directory above the location directory
If you also need the redirect (www.abc.com/?location=sydney to www.abc.com/location/sydney) to work then I think the best way to do that is to add the following to the (separate) .htaccess file located in the DocumentRoot:
RewriteEngine On
RewriteCond %{QUERY_STRING} ^(.*)location=([^&]*)(.*) [NC]
RewriteCond %{QUERY_STRING} !&e=1 [NC]
RewriteRule ^(.*)$ $1/location/%2?%1%3 [R=301,L,NE]
