Abu Dhabi seeks to retender oil field deal

07 November 2008
Gulf state-run companies seek to renegotiate deals as commodity and materials prices continue to fall.

Abu Dhabi Company for Onshore Oil Operations (Adco) is asking its international shareholders to consider supporting a retender of bids for the company’s $4.5bn Sahil, Asab and Shah (Sas) full-field development due to the drop in commodity and material prices.

The move, which has angered contractors who have already submitted bids for the project, appears to have been sparked by a wider move by state-run companies in the emirate to push for more competitive pricing on planned upstream projects.

Cost of Shail, Asab and Shah full-field development$45.5m
Percentage of Adco owned by Adnoc60
Percentage of Adco owned by Shell, BP, ExxonMobil and Total9.5
Percentage of Adco owned by Partex2

The company wrote to its stakeholders, which include the UK/Dutch Shell Group, the UK’s BP, France’s Total, the US’ ExxonMobil Corporation and Cayman Island-based Partex, in late October asking whether they favoured retendering or negotiating with the lowest bidders.

Adco is 60 per cent owned by Abu Dhabi National Oil Company (Adnoc), with Shell, BP, ExxonMobil and Total each holding 9.5 per cent and Partex holding 2 per cent.

“The letter has been sent to the shareholders, but I cannot comment on what course of action will be taken from here,” Fareed Abdulla, assistant general manager ofAdco, tells MEED. “We will communicate to the bidding companies as soon as we have clarity.”

Although no formal deadline is thought to have been set, contractors are expected to be told in the next few weeks about the decision and how it will affect the status of the project.

UAE-based Petrofac International is the low bidder for the entire contract, with a price of $4.5bn. A joint venture of Spain’s TR and Athens-based Consolidated Contractors International Company (CCC) is second with a bid of $4.6bn.

Paris-based Technip and Italy’s Snamprogetti/Saipem also priced the work, but their bids are understood to be far higher, (MEED 22:8:08).

Abu Dhabi’s Supreme Petroleum Council has already been called in to make one significant alteration to the project after Adco requested approval to split the development into packages.

However, the latest about-turn has angered several firms.

An executive from one of the bidding companies says the engineering, procurement and construction (EPC) deal was specifically priced to protect against exchange rate variations.

“They were safe on that [exchange rate] count,” says the executive. “We would be gobsmacked if they actually went ahead and retendered the entire project this far down the line.”

Another executive from a rival bidding company says that although the prices for some EPC products such as steel and aluminium have dropped, little of that fall had yet filtered through to the contracting market.

“Talk of being able to do projects 20 or 25 per cent cheaper overnight is fanciful,” he claims. “And what is to say that prices will not raise again?”.

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