Saudi oil giant Aramco has issued a hotly-anticipated tender to members of its exclusive pool of offshore engineering contractors for the next phase of redevelopment work at the massive Safaniya oilfield.
Bids are due by the end of June for the engineering, procurement, construction and installation (EPCI) contract on the sixth phase of redevelopment of Safaniya – considered the world’s largest offshore oilfield with remaining reserves estimated at some 37bn barrels.
The package – thought to be worth up to $1bn – covers 10 jackets, nine platform decks, an electrical distribution platform, pipelines and cabling, and the removal of some obsolete facilities.
The field was first brought into production in the 1970s and is subject to an ongoing programme of redevelopment to sustain capacity at around 1.2-1.3mn bpd.
The job expected to be the most-valuable apportioned upstream by Aramco since the start of the year, but the deal also comes at a time when the energy behemoth appears likely to negotiate more of the so-called long-term agreements (LTAs) granting additional firms access to such contracts.
This reflects both the growing volume of offshore work planned, as the brakes are released somewhat on spending and the wider commitments to the kingdom’s economic transformation plans by the international companies concerned.
At the same time, renewed capital investment elsewhere in the region is raising demand for contractors’ services – potentially increasing prices for Aramco and adding incentive for the company to broaden competition for its own jobs.
As the only two LTA contractors until 2015, the US-based McDermott International, and to a lesser extent Italy’s Saipem, have historically carried out the bulk of the work thus far and have continued to do so since qualification was widened. The work falls under Aramco’s Maintain Potential Programme initiated last decade to sustain output levels across the company’s maturing offshore fields.
Late last year, the Italian firm won the fourth-phase redevelopment contract – which had a similar work-scope to the sixth – while its American rival was awarded the estimated $700mn fifth-phase EPCI job shortly afterwards.
However, in July 2015, the incumbents were joined by a joint venture (JV) of India’s Larsen & Toubro with Singapore’s EMAS Chiyoda and by the US’ Dynamic Industries on the LTA list. The Indian-led joint venture picked up the largest contract among work awarded last year worth in excess of $4bn for the $1.6bn second-phase expansion of the Hasbah non-associated gas field.
The UAE’s National Petroleum Construction Company (NPCC) joined the LTA list in October. The Emirati firm has also performed strongly since joining the prestigious group – most-recently awarded an estimated $200-250 mn contract for four platforms at the Berri, Zuluf and Safaniya fields.
It has extensive experience on multi-billion-dollar projects in the UAE for its main client, Abu Dhabi National Oil Company (ADNOC). NPCC’s entry was reportedly spurred from Aramco’s side by continued dissatisfaction with the competitiveness of the bidding process as well as – and partly as a consequence of – the large volumes of work on offer.
Engineering, procurement and construction (EPC) contracts on two multi-billion-dollar projects launched since the start of the year aimed at substantially increasing – rather than merely maintaining – output at the Berri and Marjan fields are widely expected to be tendered beyond the four existing LTA signatories. Front-end engineering and design (FEED) contracts on the two schemes were awarded earlier in the second quarter.
Firms reported to have been in talks over entering the Aramco pool include Norway’s Aker Solutions, France’s TechnipFMC, and One Subsea, a JV of the US’ Schlumberger and London-based Subsea 7.
Meanwhile, UAE-based, London-listed marine fabricator Lamprell confirmed being engaged in the LTA pre-qualification process as a corollary to the firm’s participation in a shareholders’ agreement signed in late May for the Aramco-led development of the $5.2bn maritime yard planned at Ras Al Khair in the Eastern Province – in which Lamprell will hold a 20% stake.
The linkage between access to LTA-reserved work and wider investment in the kingdom’s local economic development plans was also made in an agreement signed by McDermott in March to establish a fabrication and marine services base at the Ras Al Khair complex – with continued inclusion in the contractor pool made contingent on the firm fulfilling commitments made in the yard deal.