Abu Dhabi pushes for lower prices for onshore oil deals

15 January 2010

National Petroleum Construction Company keen to finalise deal $1.5bn of contracts this month

Abu Dhabi Company for Onshore Operations (Adco) is pushing the local National Petroleum Construction Company (NPCC) to lower its price on two deals to build major new oil and gas production facilities in the emirate, which are worth an estimated $1.5bn in total.

MEED reported in December that NPCC had received a letter of intent from Adco for the deals, after submitting the lowest price in a November bid round (MEED 3:12:2009).

The engineering, procurement and construction contracts cover infrastructure upgrades and the construction of new facilities to increase production capacity at Adco’s Bab and Qusawirah oil fields.

The two companies subsequently entered into direct talks over the deal, and Adco has since repeatedly asked NPCC to lower its price. However, NPCC is now resisting the pressure to cut its bid any more, a source close to the negotiations tells MEED.

“They have asked NPCC to resubmit prices three times,” the source says. “But this time, NPCC have said they cannot go any further.”

The source adds that the companies want to seal the deal by the end of the month, with NPCC particularly keen to lock the contracts in before 21 January, when it will hold its annual board meeting.

Adco’s parent company, Abu Dhabi National Oil Company (Adnoc), entered into an aggressive programme of contract tenders and awards in 2009 as it tried to get the best deals possible in a weak global market.

Sources close to the Adco deal say that the ongoing negotiations are a sign that Adnoc still feels that it can make further savings.

The development of the Bab and Qusawirah fields is part of Adco’s ‘1.8 million’ project to increase the emirate’s onshore oil production capacity by 400,000 b/d to 1.8 million b/d by 2015. NPCC will build the infrastructure to support the 53 wells Adco is drilling at the Bab field and the 44 wells it is drilling at Qusawirah.

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