Aramco agrees to joint venture for $5.2bn maritime yard

31 May 2017

Gulf coast project will be built with state shipping company, Lamprell and Hyundai Heavy Industries

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State-owned oil producer Saudi Aramco has signed a joint venture agreement with three companies to build a $5.2bn shipyard in Ras al-Khair on Saudi Arabia’s Gulf coast.

The agreement was signed with state-owned National Shipping Company of Saudi Arabia (Bahri), UAE-based marine engineering specialist Lamprell and South Korea’s Hyundai Heavy Industries (HHI).

The scheme is part of the government’s strategy to diversify the Saudi economy to decrease reliance on oil exports and expand the kingdom’s manufacturing base.

The agreement, which was first put forward in a memorandum of understanding (MoU) signed in January 2016, will see the partners establish the King Salman International Complex for Maritime Industries & Services.

According to Lamprell, the maritime yard will be the largest in the GCC in terms of size and scale, and will be partially operational in 2019 and fully operational by 2022. The yard will comprise 4.3 kilometres along the coast of Ras al-Khair in the kingdom’s eastern province.

Lamprell will be the technical partner for Zones A and D, which will provide maintenance, repair and overhaul (MRO) services for jack-up drilling rigs and commercial vessels, and the construction of jack-up drilling rigs, respectively.

HHI will be the technical partner for Zones B and C, which will respectively construct and undertake MRO services for offshore support vessels, and construct commercial vessels.

Aramco will enter an offtake agreement with the joint venture to purchase, or procure the purchase, of a minimum of 20 jack-up drilling rigs, as well as offshore support vessels and MRO services for jack-up drilling rigs and offshore support vessels operating on Aramco’s offshore assets.

Meanwhile, Bahri has agreed to purchase a minimum of 75 per cent of its commercial vessel requirements and MRO services from the joint venture based on competitive market prices.

Aramco has agreed to fund $3.5bn of the project’s total cost of $5.2bn. The remaining cost will be covered by the consortium based on the requirements of each zone. Lamprell said it would invest up to a maximum of $140m in the scheme.

In October 2016, a consortium of the Netherlands’ Royal Haskoning and South Korea’s Hyundai Engineering & Construction was awarded a five-month front-end engineering and design (feed) contract on the project.

The megaproject is in line with Aramco’s strategy to increase the volume of goods and services it procures from inside Saudi Arabia.

Aramco is aiming to double the percentage of locally produced energy-related goods and services it procures from 35 per cent to 70 per cent by 2021, as part of its In Kingdom Total Value Add (IKTVA) programme.

During US President Donald Trump’s visit to Saudi Arabia on 25 May, more than $45bn-worth of deals were signed between the Saudi energy sector and US companies, the majority of which involve some element of manufacturing oil-related equipment in the kingdom.

In March, US offshore specialist McDermott signed an MoU with Aramco to build a new fabrication and marine complex as part of the project in Ras al-Khair, located 60 kilometres north of Jubail.

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