The state-run energy firm has decided to increase capacity for a second time at its offshore Karan gas field in the Gulf. It has also surprised the market by launching a bidding round for the $10bn-plus Yanbu export refinery just weeks after its Jubail export refinery was put out to tender.

At a hastily convened energy summit in Jeddah last month, the kingdom said it was prepared to increase production capacity to a record 15 million barrels a day (b/d) if needed, to reassure international markets about supplies.

Aramco is understood to have agreed to boost capacity at Karan to 1.8 billion cubic feet a day (cf/d), almost double the original target of 1 billion cf/d set last year, and a further 20 per cent rise on the revised 1.5 billion cf/d set earlier this year (MEED 1:2:08).

In the past few weeks, Aramco has informed contractors on the Karan project that the second increase is feasible, following analysis of data from its test wells.

Selected contractors have been invited to submit technical and commercial bids by the end of September to build a multi-billion-dollar gas-processing facility at Karan, which will be constructed by 2010 (MEED 30:1:08).

Seven contractors are expected to submit bids, including Italy’s Snamprogetti and Techint, Spain’s TR, Japan’s JGC Corporation, Hyundai Engineering and Construction (Hyundai E&C) and Samsung Engineering of South Korea, and France’s Technip.

Natural gas demand in the kingdom is expected to reach 14.5 billion cf/d by 2030, from about 5.5 billion cf/d currently.

The offshore Karan field is thought to contain more than 9 trillion cubic feet of gas. Initial flows in July 2007 were reported at 80 million cf/d of associated gas and 1,400 barrels a day of condensate, but Aramco has since considerably revised its planned output upwards. Exploratory drilling took place in late 2006.

On the downstream side, Aramco has been expected to delay the development of one of two new export refineries planned for Yanbu and Jubail because of rising costs. However, in the first week of July, Aramco invited companies to bid for the four main process packages at Yanbu, with technical and commercial bids due by 3 November. That followed bid invitations for Jubail being sent out earlier this month (MEED 4:7:08).

Aramco hosted a job explanation meeting for contractors in London on 9-10 July to outline its plans for Yanbu, in conjunction with the US’ ConocoPhillips, its joint venture partner.

The two companies are expected to tender more than a dozen engineering and construction packages, although most of the high-profile contracting firms are expected to focus on the more lucrative process packages.

The first package, worth $2bn, covers the coker unit. Prequalified bidders include Japan’s Chiyoda Corporation, JGC, Technip, Snamprogetti, TR and Hyundai E&C.

The second contract, also worth $2bn, covers the crude block. Bidders include Samsung, JGC, Snamprogetti, TR and Daelim Industrial Company, and Hyundai E&C.

Contractors bidding for the $1.5bn gasoline component include Chiyoda, Samsung, JGC, Technip, Snamprogetti, TR and the US’ Foster Wheeler.

The hydrocracker package, worth $1.5bn, is being sought by Chiyoda, Technip, JGC, Snamprogetti, TR, Foster Wheeler and the US’ CB&I Lummus.

Companies invited to the London meeting have been told that while they can create consortiums to bid for multiple contracts, their partners must be firms that did not make the original invitation list.

The cost of developing Yanbu is thought to have at least doubled from the initial estimate of $6bn, when the memorandum of understanding was signed by Conoco and Aramco in 2006.

Under the cost schedule, Conoco and Aramco’s rate of return is understood to be about half the 12-15 per cent expected for a project of this size.

Earlier this year, Technip, which is completing the front-end engineering and design on the Jubail refinery, told MEED that because of the increase in costs, Aramco was likely to prioritise the development of one of the refineries rather than develop them at the same time (MEED 18:04:08).

However, one executive close to Aramco’s refinery division says the kingdom always intended to stick to its original plan of developing both refineries in tandem.

“Costs are certainly up but we have been planning these two refineries for some years now,” he says. “There is capacity to handle both and we have the full support of our joint venture partners.”

The Jubail refinery, which is expected to process Arabian Heavy crude and a new grade of crude from the offshore Manifa field, is now due to begin production in 2013, a year later than planned, while Yanbu is expected to begin production later that year.

The kingdom’s refining capacity of 2.1 million b/d could be boosted by up to 1.6 million b/d under Aramco’s expansion plans.

Aramco could not be reached for comment.