Aramco earmarks $4bn for small projects

14 June 2002

Details of Saudi Aramco's spending plans for the next two years are beginning to emerge, indicating a renewed focus on small project work following major awards on the Qatif incremental oil and associated gas project. The project schedule suggests the next major Aramco commitment, the development of the Khurais field complex near Ghawar, is unlikely to be revived in the near future.

Aramco expects to invite bids from local and international contractors for over $4,000 million-worth of projects over the next 18 months. 'Some 94 projects are slated for the next year and a half,' a spokesman for Aramco told MEED on 10 June. 'These are essentially divided into six categories: building and infrastructure, communications, pipelines, plant upgrades, other major onshore projects, and offshore work. Plant upgrades will provide the bulk in terms of the number of projects, though not necessarily the largest share of spending.'

Local contractors say that Aramco uses an unofficial benchmark of $17-18 a barrel as a guideline for spending on major projects. The company has concentrated most of its attention on increasing refining capacity since the beginning of the year, with project activity centred on its incremental oil and associated gas project at Qatif. Five lump sum turnkey (LSTK) contracts awarded in March were worth an estimated $1,200 million in total, and the project has provided a range of opportunities for contractors in associated civil and infrastructure work. The main contractors on the project are Italy's Snamprogetti, which was awarded the largest, $630 million package, Paris-based Technip-Coflexip, Arabian CBI, which is part of the US' Chicago Bridge & Iron Company (CBI), Suedrohrbauof the Netherlands and the local Contracting & Construction Enterprises(MEED 8:3:02).

'Qatif is the only big Aramco project I am aware of at the moment,' says a contractor working in the Eastern Province. 'There are a lot of smaller projects coming up now, particularly in upgrades, expansion work and so on. The 18-month timescale [of the spending plan] really precludes any big LSTKs in the near future. Oil prices are high, but it takes a long time to build up the billions you need for these types of projects.'

Aramco is slowly beginning to ramp up operations outside the kingdom, with much of its attention focused on the Far East, which absorbs about 40 per cent of its crude oil exports and 60 per cent of exports of refined products. 'Liberalisation and restructuring of the oil industry in Asia have brought opportunities for investment and expanded trade,' senior vice-president of international operations Abdulaziz al-Khayyal said on 11 June. 'We have increased our oil exports to Asia and have been engaged in negotiations with a number of large and reputable oil companies to invest in the downstream sector.'

Al-Khayyal, who was speaking at a conference on oil and gas in Kuala Lumpur, said Aramco was also pursuing investments in international refining and marketing joint ventures. Under an agreement signed at the end of last year, Aramco is preparing a joint feasibility study with ExxonMobil China Petroleumand Fujian Petrochemical Companyfor the construction of a combined oil refinery and petrochemical complex in China. The project, which will involve the construction of a new worldscale ethylene steam cracker, will be the company's first major investment in petrochemicals (MEED 30:11:01).

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