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A partner’s perspective on working with Sharakat

Saudi Arabia’s water scarcity is at the centre of a blossoming infrastructure market, with private partners at its core. Its prosperity is reflected in the success of a number of flagship projects

By SHARAKAT

Until new gas supplies materialise, the development of Oman’s new petrochemicals capacity will remain constrained. Future growth will largely be tied to the go-ahead of two major refining projects: the expansion of the Sohar refinery and the construction of the grassroots Duqm refinery. Both will deliver significant volumes of naphtha, potentially for use by the local petrochemicals sector.

As far back as 2007, the government considered building a new refinery at Duqm as part of plans to develop a major industrial area at the central Oman coastal site. The scheme gathered momentum in 2010, when Oman Oil Company (OOC) and Abu Dhabi-based International Petroleum Investment Company (Ipic) agreed to carry out a joint feasibility study.

Joint venture

This was followed up in August 2012 with the two sides establishing a 50:50 joint venture, known as Duqm Refinery & Petrochemical Industries Company (DRPIC), to implement the scheme. The first phase of the project involves the construction of a 230,000 barrel-a-day (b/d) refinery at an estimated cost of $6bn by 2018. A second phase, involving an integrated petrochemicals plant, will follow.

In mid-2012 the US-based Shaw Group was appointed as project manager. In March 2014, the US’ Foster Wheeler was awarded the front-end engineering and design (feed) contract on the refinery. Foster Wheeler was selected ahead of at least four other firms competing for the deal, which included US-based groups Bechtel, CB&I Lummus and KBR, and France’s Technip, which submitted bids in August 2013.

The feed contract is expected to be carried out over 14 months, with DRPIC likely to tender the engineering, procurement and construction packages in 2015.

Oman’s energy projects market is expected to grow substantially over the coming years, driven by several megaprojects planned by the government. As much as $35bn could be awarded between 2013 and 2016, as the sultanate pushes forward with the Khazzan tight gas project, the Duqm refinery and petrochemicals complex, the Liwa Plastics project, and the three $1bn oil field developments planned by Petroleum Development Oman.

There may be some slippage on the programme, however. While progress has been made on all the major projects since 2011, the final investment decision has yet to be taken on most. Furthermore, some will require significant borrowing from the project finance market, which could take additional time. Finally, while it has improved in recent years, Oman’s track record for implementing projects as scheduled is not as strong as in other parts of the GCC.

The first phase involves the construction of a 230,000-b/d refinery at an estimated cost of $6bn by 2018