Aramco reviews projects following oil price slump

05 November 2008
Saudi Aramco is considering renegotiating contracts on its Manifa oil field increment and Karan gas field development in response to the recent fall in oil prices.

Aramco’s vice president of project management Ali Al-Ajmi tells MEED that a review is underway but says it is too early to say how it will affect the two projects.

“We are re-evaluating Manifa and Karan but that is all there is to say at the moment,” Al-Ajmi says.

He declines to comment on how the changes might affect contractors who have already signed billion-dollar deals for Manifa.

A second Aramco official says the state oil giant will also work with firms to try and bring down equipment costs for the kingdom’s two export refineries at Jubail and Yanbu.

“We are seeing costs fall across the board and that needs to be recognised in the bids which we receive,” the official says.

Oil prices have fallen by more than half in recent months, from an all-time high of $147 a barrel in mid-July to around $65 a barrel now, while the price of other commodities as also dropped.

Aramco recently delayed the deadline for engineering, procurement and construction (EPC) bids at Jubail to February 2009, from early November. It also delayed bids for the Yanbu plant until the end of the year.

The two 400,000 barrel-a-day (b/d) facilities are being developed by France’s Total and the US’ ConocoPhillips respectively.

The moves by Aramco have baffled international contractors who say they have yet to be informed by the state-run firm about how the reviews will affect their investment plans.

Earlier this year, Italy’s Snamprogetti, Japan's JGC Corporation and Spain's TR secured the three main EPC deals on the 900,000 barrel-a-day (b/d) Manifa development (MEED 6:6:08).

Companies are due to submit bids this week for the main offshore production facilities at Karan, following a series of delays (MEED 19:8:08).

The field is expected to produce 1.8 billion cubic feet a day (cf/d) of gas in its first phase by 2011.

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