Favourites emerge for Aramco refinery, NGL projects

24 August 2016, Week 33 Issue 270

State-owned Saudi Aramco is assessing bids for the main contracts on the long-delayed upgrade of the company’s largest domestic refinery at Ras Tanura on the Gulf coast. It has finally opted to proceed with a reconfigured scheme that had posed budgetary dilemmas well before the oil revenue slump of the past two years.

Meanwhile, frontrunners have emerged for a prestigious job to implement a natural gas liquids (NGL) recovery project at the state behemoth’s flagship asset – the supergiant Ghawar oilfield, source of almost half of the kingdom’s crude. Aramco is proceeding, as executives have frequently pledged, with such key strategic projects despite the recent collapse in income – focussing on gas, as with the upstream scheme, and on maximising the in-kingdom value of its crude, as at the stalwart refinery.

The two engineering, procurement and construction (EPC) contracts on the estimated US$3 billion so-called Clean Fuels Project (CFP) at the 550,000 barrel-per-day Ras Tanura refinery cover the new processing units – which will enable the production of a wider range of fuels while lowering their sulphur content – and the offsites and utilities (O&U).

For the former, larger package, five of the eight prequalifiers are reported to have priced the work, which covers a 140,000-bpd naphtha hydrotreater, a 90,000-bpd catalytic cracking reformer, a 65,000-bpd isomerisation unit and a 70,000-bpd toluene unit. These bidders are GS Engineering & Construction, Hyundai Engineering & Construction and Samsung Engineering, all of South Korea, Japan’s JGC Corp. and Spain’s Tecnicas Reunidas (TR).

TR is reported to be the frontrunner. India’s Larsen & Toubro and the UK’s Petrofac are understood to be competing for the O&U work. Plans for the upgrade to bring output in line with new stricter environmental standards date back to the beginning of the decade – when the addition of petrochemicals capacity was also envisaged – with the US’ Jacobs Engineering awarded what was initially expected to be a relatively swiftly-executed front-end engineering and design (FEED) contract in 2011.

However, original EPC bids submitted in 2013 came in well above Aramco’s budget and a proposed paraxylene (PX) unit was removed from the scope before a retender the following year that inopportunely coincided with the beginnings of the two-year oil price slump.

The bidding process was thus suspended in early 2015 as the likely longevity of the revenue downturn prompted a review of all major projects on Aramco’s slate and across government for their strategic necessity. However, a scheme to increase the sophistication of Aramco’s biggest local refinery – supplier of nearly 33% of domestic fuel requirements – was always likely to pass the test at some point and CEO Amin Nasser duly named the Ras Tanura upgrade as among the key projects with which the company intended to proceed with during a speech in March.

His assertion was confirmed with the retender of the main EPC contracts during the first quarter and the award early in the second quarter of early works and site preparation contracts on the project to the local Nesma & Partners Contracting Co.

Also evidently cleared to proceed during the review was the estimated US$800-900 million Uthmaniyah ethanol feed recovery project to recover ethane, propane and other NGLs from sales gas at the production zone of the same name at the Ghawar field. The supergiant deposit produces around 5 million bpd of crude and thus correspondingly large quantities of associated gas.

Bids were submitted in late June for the EPC contract from among a nine-strong shortlist – with Petrofac and TR reported to be the lowest bidders and frontrunners amidst fierce competition for the work, which will provide much-needed feedstock for the local petrochemicals industry.

JGC carried out a similar project at the nearby Hawiyah field during the second half of last decade while Samsung recently completed a major NGL recovery project at the 1 million-bpd Shaybah field: both firms were prequalified for the Uthmaniyah contract.

Petrofac and TR have already benefited handsomely over the past year from Aramco’s determination to continue with key schemes – picking up the three largest onshore EPC contracts on the US$6.5 billion Fadhili gas plant project to process non-associated sour gas from the newly-developed Hasbah field in the Gulf into sales gas to feed the national grid.

Current upstream contracting is concentrated offshore, where bidding is monopolised by the four signatories of Aramco’s so-called long-term agreements granting the companies the exclusive right to bid for offshore EPC work. Awards are awaited on various packages across several Gulf fields, including two on the fourth-phase redevelopment of Safaniya – the world’s largest offshore oilfield and thus not to be neglected on the grounds of short-term oil market vicissitudes.

 

Edited by

Ian Simm

Editor

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