Clients can’t keep squeezing prices from oil contractors in Emirates

17 February 2010

Adnoc will need to be prepared to pay more for its projects in the future if it is to meet its targets

Having been forced to cut prices over the past year, contractors that were awarded oil and gas deals in Abu Dhabi during 2009 now have the daunting task of trying to complete those projects on time and within budget.

Abu Dhabi National Oil Company (Adnoc) held off from making awards in 2008 in order to benefit from falling contracting costs and materials prices. Once those costs reached the bottom, Adnoc started to issue a wave of -tenders and retenders to capture the maximum savings possible.

Other national oil companies in the region acted in a similar way, but none did it to the same extent as Abu Dhabi. In total, Adnoc awarded about $30bn worth of contracts last year. By comparison, the combined value of its awards from 2003 to 2008 was just $8bn.

The company estimates that its approach meant it was able to shave up to 20 per cent off the cost of its projects.

But, in the months since the deals were signed, the construction sector has started a slow recovery. Materials and employment costs are moving upwards and, with a host of other energy projects due to get under way across the region, they are expected to continue to rise.

Contractors will have to run a tight ship to ensure they keep close to budget. But, having acted so tough until now, Adnoc will also need to be prepared to pay more for its projects in the future if it is to meet its targets.

You might also like...

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications