Aramco offers flexibility on refinery upgrade deals

31 July 2008

State oil giant Saudi Aramco is departing from its usual contracting policy to offer engineering firms flexible terms on the multi-billion-dollar scheme to cut the sulphur content of gasoline produced at four refineries.

Aramco has provisionally agreed to conduct the engineering, procurement and construction (EPC) upgrades for the refineries on a cost-reimbursable basis rather than the fixed-price terms it usually favours.

Construction contracts for the state-run firm’s two major export refineries at Yanbu and Jubail are on a fixed-price basis, improving cost certainty for Aramco.

However, one executive from a large international EPC firm tells MEED that contractors have provisionally agreed cost-reimbursable contracts on the latest deals, leaving Aramco to carry all the risk.

“Previous deals on these refineries have been done on a [reimbursable] costs-plus basis and Aramco has come around to the idea that it needs to strike a balance for these upgrades to attract the best firms,” he says.

Bids for the first upgrade at Aramco’s refinery at Yanbu are due in August, with Australia’s WorleyParsons, US firms Bechtel, Foster Wheeler, and KBR all expected to compete. An award for the facility will be made by December.

Aramco is required to modify the crude units to meet standards introduced by the US in 2006.

The Jubail-based Sasref refinery is expected to be the next to be upgraded, with the Riyadh and Jeddah refineries to follow (MEED 23:6:06).

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