Bidders gear up for Kharg

16 November 2002

Companies are preparing to submit bids by 30 November for the estimated $600 million onshore package on the Kharg island gas gathering and natural gas liquids (NGL) recovery project. Bidding for the project comes amid indications that talks between National Iranian Oil Company (NIOC) and a Japanese-led consortium to provide financing for the scheme are coming to a close. NIOC is negotiating on behalf of its subsidiary Iranian Offshore Oil Company (IOOC), the client on the project (MEED 11:10:02).

Six local/international consortia last year prequalified for the engineering, procurement and construction (EPC) contract to build onshore facilities on Kharg island, including gas gathering stations, two NGL recovery plants, pipelines and storage and export facilities. Industry sources say three are expected to participate in the tender. They are: JGC Corporation of Japan, with South Korea's Daewoo Engineering & Construction Company and the local Sadra; Sharjah-based Petrofac International, with Japan's Kawasaki Heavy Industries and Jahanpars and Kayson Construction Company, both local; and South Korea's Daelim Engineers & Construction Company, with Japan's Toyo Engineering Corporation and Petrochemical Industries Design & Engineering Company (PIDEC) and Erection & Construction Company (ECC), both local.

Bids for packages 1 and 2, covering the offshore portion of the project, were submitted last November. However, no contracts have been awarded as a result of the uncertainty surrounding the financing of the scheme (MEED 28:12:01; 30:11:01). Industry sources say a memorandum of understanding (MoU) to arrange financing for the project, whose total costs are estimated to reach $1,000 million, is likely to be signed in early December. Negotiations between NIOC and a consortium led by Japanese trading house Mitsui & Company have been ongoing for almost nine months.

The consortium is understood to comprise several other financial institutions, including Deutsche Bank and a number of Japanese banks. 'The project requires complex financing and we will need at least 10 banks for syndication,' says a source close to the project.

NIOC and Mitsui signed an MoU earlier this year, but the agreement was not formally endorsed because the Iranian side required additional clarifications.

The source says that the financing arranged by the Mitsui-led group might only cover the onshore portion of the scheme, with the remainder possibly being provided by NIOC on a cash basis. Major European export credit agencies (ECAs) and Japan Bank for International Co-operation are expected to back the deal.

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