• Saudi Aramco signs long-term agreements with four contractors
  • Agreements cover offshore engineering, procurement and construction (EPC) services
  • US contractor McDermott is guaranteed $1.5bn of offshore work
  • Other signatories will still win some work

US contractor McDermott has emerged as the big winner of state oil company Saudi Aramco’s programme to put in place a series of long-term agreements (LTAs) with suppliers to provide engineering, procurement and construction (EPC) services on its offshore facilities.

MEED understands that Saudi Arabia’s national oil company is on the verge of signing five-year agreements with four contractors, including McDermott, to provide EPC suppprt on its offshore facilities.

But uniquely, McDermott’s deal includes a guaranteed lump-sum element with an estimated value of more than $1.5bn to carry out offshore EPC work over the first 32 months of the agreement.

The scope of the lump-sum element of the agreement covers both rehabilitation of offshore facilities as well as new projects, including platforms, pipelines and cables.

Recruitment

“McDermott will be very happy with this win,” says one oil and gas source based in Saudi Arabia.

“It is a definite upgrade on their previous long-term agreement. The most positive part of this is that they can mobilise [human] resources because they have a guaranteed tranche of work to execute.”

Industry sources say that the company has already started a recruitment drive aimed at ramping up headcount in preparation for the award.  

McDermott declined to comment on the contract when contacted by MEED.

As MEED reported in April, the three other contractors set to sign LTAs with Aramco are:

MEED understands however that the deals will be non-committed agreements, meaning there is no guaranteed work included as part of the agreements.

Local capacity

Emas will utilise local fabrication facilities from India’s Larsen & Toubro as part of the deal. Unit rates have been agreed by all of the potential signatories, but with no guaranteed work it is likely that Emas and Dynamic Industries will have trouble breaking into the market in any significant way.

“Saipem also has a strong presence in the kingdom and will be expecting to pick up work if McDermott’s workload gets too much,” says an executive working for an international contractor with operations in the GCC.

“The other two are trying to break into the market and I can’t see them picking up too much work in the first few years. They will have to prove they are committed first and this means that 95 per cent of the contracts will go to either McDermott or Saipem.”

The deals will last for five years, with an option of a three-year extension, and the contract will run alongside the Maintain Potential Programme (MPP), which is Aramco’s long-term contract for engineering, design and project management of its offshore operations.

Aramco awarded the MPP to three international engineering consultancies in March.

The three companies were the US’ KBR and Mustang Engineering, and Australia’s WorleyParsons.

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