Aramco consolidates offshore contracts

19 April 2015

Having long-term deals in place will allow the oil major to manage cash flow more efficiently

State oil major Saudi Aramco has been looking at a workable long-term contract with engineering, procurement and construction (EPC) contractors for some years and the company should soon have one in place that covers all of its offshore operations.

The oil major has previously had an agreement with Italy’s Saipem and the US’ McDermott, but having only two signatories has proved problematic in the past. If one of the two companies did not want to execute a job, Aramco was left with the choice of opening it up to a full tender or awarding on a single-source basis.

Neither of these options offered Aramco a satisfactory solution. Signing deals with four contractors should mean that in the future, there will be a competitive process coupled with fast-track tendering.

Aramco’s offshore operations in the Gulf are extensive and include the world’s largest offshore oil field as well as several large non-associated gas fields. All of these assets require constant attention in order to maintain production levels and this can only be achieved by being able to react quickly. The new deal will enable this to happen.

The company set the precedent for a multi-layered deal by awarding three engineering consultancies a long-term contract for the Maintain Potential Programme (MPP). The MPP is responsible for all engineering and project management services for Aramco’s offshore operations and will run in conjunction with the EPC contract.

A long-term EPC deal will allow Aramco to save money and manage cashflow, but it also means the signatories will be able to commit to Saudi Arabia’s offshore contracting market, knowing that any initial investment in fabrication facilities, materials and personnel will be offset over the length of the contract.

If this system works it could also lead to other long-term partnerships being rolled out, especially in the operations and maintenance sector.

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