Barzan offers welcome boost for contractors seeking deals in Qatar

17 November 2009

Contract-hungry firms that fail to win the Barzan job could face a long wait before new gas schemes from the North field are tendered

When Qatar applied the brakes to some of its highest-profile oil and gas deals at the end of 2008, its rationale was clear. The cost of building new gas facilities in the small Gulf state had roughly doubled between 2003 and 2008, just as Qatar Petroleum (QP) had embarked on an ambitious programme to establish the country as the world’s largest producer of liquefied natural gas (LNG).

After pausing for breath, the state-run firm has recognised that tumbling raw materials prices, sparked by the global economic downturn, have now given it the opportunity to negotiate cheaper deals on its major projects.

“Firms which fail to win the Barzan job could face a long wait before new gas programmes are tendered”

The launch of the project finance phase and the re-launch of the engineering, procurement and construction (EPC) portion of the Barzan gas development programme are significant milestones for a country that has tendered few new energy projects in 2009. Doha is expected to seek reductions of 20 to 30 per cent in the cost of Barzan – a joint venture project of QP and the US’ ExxonMobil Corporation – to justify the major new gas development.

The banks’ willingness to lend to one of Qatar’s gas projects will provide a useful indicator to other developers in the region of financiers’ appetite for energy projects. With the moratorium on development of Qatar’s North field, the world’s largest non-associated gas field, not due to be lifted until 2014, most major international contractors are expected to bid for the EPC phase of the Barzan scheme.

That will be good news, although most contractors will be hoping that the Barzan programme blossoms into a much bigger gas development, spread over several phases. With all of the remaining LNG trains to be delivered by the end of 2010, contract-hungry EPC firms that fail to win the Barzan job could face a long wait before new gas programmes from the North field are tendered.

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