Industry sources say Aramco's decision to postpone the award of the EPC contracts is the result of the dollar's weakening and the subsequent reduction of spending power on goods and services imported from the eurozone, the UK and Japan, which make up a significant part of the company's expenditure.
'This is a funding issue. Saudi Arabia is a petrodollar economy. Revenues are expressed in dollars while much of the expenditure is in euros,' says a source familiar with the project. 'Clearly, the strengthening of the euro has an impact on the project.'
In the case of the gas plant programme, most of the potential bidders - including Chiyoda Corporationand JGC Corporation, both of Japan, Italy's Snamprogettiand Paris-based Technip- have significant non-dollar expenditure. The same applies to contractors such as Italy-based Techint and Spain's Tecnicas Reunidasthat are looking at the smaller packages covering the Juaymah and Hawiyah expansion projects, worth about $200 million each.
It is understood that Aramco now plans to pay for the programme out of its 2005 budget. Industry sources say Aramco's decision may have been supported by slow progress on two major petrochemical projects in Yanbu planned by Saudi Basic Industries Corporation (Sabic)and its subsidiary, Jubail-based Eastern Petrochemical Company (Sharq), a 50:50 joint venture between Sabic and a group of Japanese companies led by Mitsubishi Corporation. Both projects have been allocated feedstock from Aramco's gas plant programme and - based on their latest status - are now expected to come on stream in late 2008. This would in turn coincide with the start-up of the rescheduled gas plant programme, whose implementation will take three years.
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