Azzawiya upgrade in doubt again

14 July 2006

The future of the project to expand the country's second biggest refinery is once again in doubt, after a poor response from potential bidders forced Azzawiya Refinery Company (ARC) to extend by seven weeks the bid deadline for the main contract on the project. The seven international teams prequalified to bid for the estimated $650 million engineering, procurement and construction (EPC) contract now have until 20 August to submit bids (MEED 28:4:06).

Sources in Tripoli say that concerns about the viability of the tender emerged after only one of the prequalifiers - Engineers India (EIL) - attended a site visit for bidders in mid-May. The lack of enthusiasm for the project has also been evident from a much lower than expected number of inquiries from the prequalified firms. 'There has not been much interest,' says a source in Tripoli. 'The number of inquiries is not consistent with the current market.'

The project is aimed at increasing by 24 per cent the capacity of the 120,000-barrel-a-day refinery and involves the installation of a new continuous catalytic reformer (CCR) unit, naphtha and gas-oil hydrotreaters and an isomerisation unit, as well as the installation of pneumatic control units and a supervisory control and data acquisition (SCADA) system.

Contracting sources say that the bureaucratic and old-fashioned procedures in place at ARC have made the project deeply unattractive, particularly when there is an abundance of work available elsewhere. There is increasing speculation that the project will have to be retendered. Several potential bidders were put off by a requirement that the successful contractor will have to reinvest 10 per cent of the contract value in local public health, higher education and research and development schemes. 'We are contractors not investors,' says one contractor.

The delay is the latest instalment in a long-running saga that began in February 2002, when Paris-based Technip was awarded a letter of intent for the contract. Technip later declined to submit revised prices, and the contract was awarded to the then LG Engineering & Construction of South Korea. When the Korean firm terminated its contract in May 2003, ARC was forced to reissue the contract. Negotiations with Germany's Uhde broke down in early 2005. 'This is the third flop in a row,' says a source in Tripoli. 'It is becoming a matter of credibility.'

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