Conoco to decide fate of two $10bn schemes in May

31 March 2010

No final decision has been made on Yanbu refinery in Saudi Arabia or Shah gas project in UAE

US energy major ConocoPhillips will not decide on the fate of two $10bn oil and gas projects in Saudi Arabia and the UAE until May, leaving contractors bidding on construction contracts in limbo, sources close to the developments tell MEED.

The company plans to build a $10bn-plus refinery at Yanbu on Saudi Arabia’s Red Sea coast with state energy giant Saudi Aramco and a $10bn-plus sour gas project with Abu Dhabi National Oil Company (Adnoc) in the capital of the UAE.

Engineering firms bid for construction deals on the 400,000 barrel a day (b/d) Yanbu in February after delays in 2008 and 2009 designed to bring the cost of the project down. The partners opened the prices for the deals a week after receiving them and started a series of talks over costs with bidders in March (MEED 9:3:2010) .

Sources close to Aramco say that the company selected its favourites for each contract during a 23 March meeting. The partners were able to slash the costs on offer significantly, and the low bidders who emerged in February have been replaced by a new set of contractors.

Prices were submitted on the five main construction deals for the Shah scheme in March, and again the partners have opened the prices in order to get an idea of the cost of the scheme (MEED 28:3:2010).

“it is a really tricky situation,” says a source at one bidding firm. “Everyone wants to know what is happening, but realistically we won’t have definitive answers until May on either the Yanbu or the Shah projects; we don’t even know if they will move ahead.”

But Conoco is yet to confirm it will definitely move ahead with either scheme.

“The key is, we need to know what this is going to cost,” said Ryan Lance, Conoco’s senior vice-president for exploration and production during a teleconference with analysts on 24 March. “So we’re in the middle of that process right now and I will tell you once we understand what those costs are that come in from the bids, we’ll make a value based decision. “

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