Abu Dhabi and ConocoPhillips in talks for $10bn Shah gas field management deals

28 August 2009

Firms in talks for $10bn Shah gas field management deals. Project will increase production at the site to 1 billion cubic feet a day

Abu Dhabi National Oil Company (Adnoc) and US energy major ConocoPhillips have opened talks with international engineering firms over two deals to manage the $10bn-plus Shah gas field development project.

The scheme, which involves building gas-processing facilities and pipelines that will enable Adnoc to increase production at the field, is one of the biggest oil and gas projects tendered in the Middle East this year.

On completion, Adnoc and Conoco will produce and process 1 billion cubic feet a day of natural gas from the Shah field, 80 kilometres south of Abu Dhabi.

The two companies will transfer the gas to storage facilities at Habshan and on to the export terminal at Ruwais via a network of pipelines.

Adnoc will take sulphur produced as a byproduct of natural gas from the Shah field and transport it to Ruwais via a 275-kilo-metre-long pipeline, the longest of its kind in the world.

Adnoc and Conoco started the tendering process for the 10 engineering, procurement and construction (EPC) contracts on the scheme in June. They have now asked for formal expressions of interest in the project management consultancy (PMC) deals by the end of August.

“They have put the EPC packages into two loosely related bundles, and the PMCs will oversee the two areas of work,” says the business development manager of one firm invited to bid on both deals.

One company will oversee work on the first four EPC packages on the scheme, covering gas-gathering and processing facilities, the sulphur recovery unit, and offsites and utilities at Shah.

The winning contractor will also manage early works at the Shah site and the construction of non-process buildings.

The second winning bidder will manage the construction of the gas pipeline, the liquid sulphur pipeline, the sulphur-handling terminal at Ruwais, and dredging works, again at Ruwais.

Among the firms approached to bid on the deals are the US’ Fluor Corporation, Australia’s Worley-Parsons, which was also the project manager for the design phase of the scheme, the US/Canadian Veco, and the UK’s Stone & Webster.

The winning firms will not take as much control of the project as they would on smaller schemes because ConocoPhillips is heavily involved in managing the project, according to executives hoping to bid on the deal.

“Conoco likes to put a lot of its own people into these big jobs and then add PMCs to supplement them, so it won’t be project management in the purest sense,” says one of the bidders. “Since these packages are all over the place, it will need a lot of help, though.”

Contractors say they are scrutinising the second PMC deal carefully because it contains the sulphur pipeline package, which is seen as risky. The temperature of the pipeline needs to be kept at 125-155˚C. If water mixes with sulphur, it turns into sulphuric acid, making any leaks extremely dangerous. Fluor is currently undertaking a second study of the pipeline to make sure it is technically feasible.

Adnoc and Conoco have yet to set a date for an official construction tender for the pipeline.

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