Daelim frontrunner for Kuwait Mina al-Ahmadi refinery deal

11 March 2010

South Korean firm out front after low bid of $888m for fractionating column

South Korea’s Daelim Corporation is the frontrunner to win a retendered KD256m ($888m) deal to build a new gas fractioning column at Mina al-Ahmadi refinery in the south of Kuwait after the submitting the lowest bid for the contract in a 2 March bid round.

Daelim’s price beat bids from Italy’s Saipem, SK Engineering & Construction, and GS Engineering & Construction, both of South Korea. A contract award is expected by the end of May.

Mina al-Ahmadi bids
YearContractorValue ($m)
2007SK Engineering (winner)750
2010Daelim (front runner)890
 % Change15.7

The winner of the engineering, procurement and construction (EPC) deal will build a fourth gas fractionation facility at the refinery. The unit will separate associated gas produced in the north and southeast of the country into its basic components.

At $888m Daelim’s price is 15 per cent higher than the lowest bid of $750m submitted for the deal by SK in December 2007 despite a drop of almost 20 per cent in engineering, procurement and construction (EPC) costs across the region between 2008 and 2009.

It remains unclear whether this is due to KNPC changing the terms of the contract to a lump-sum turnkey basis, where the contractor offers a single price for the deal and shoulders much of the risk. The original contract was tendered on a cost-plus basis, where the contractor sets a basic fee for the deal before negotiating costs at a later date (MEED 25:9:09).

Although Daelim’s bid was almost $900m contractors do not expect KNPC to feel the need to retender the contract, says one source close to the deal.

The Mina al-Ahmadi refinery is approximately 45 kilometres south of Kuwait City.

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