Engineering, procurement and construction (EPC) contractors active in the GCC’s oil and gas sector are gearing up for the long haul. And as yet more projects in the marathon list of capacity additions are rolled out, stamina will be just as important as capacity.

In terms of contract awards, 2006 promises to be even busier than 2005 for the international EPC contractor, with more than $44,000 million worth of new contracts expected to be awarded (see table). Whereas gas projects, driven by Qatari liquefied natural gas (LNG) schemes, dominated proceedings last year, the focus this year will shift to Saudi Arabia and its oil field developments.

Saudi Aramco will take centre stage in the year ahead. Onshore, it plans to award up to $18,000 million worth of contracts to increase output by more than 1.5 million barrels a day (b/d) through the Khurais, Shaybah and Nuayyim field developments. Significant work is also planned offshore, with Aramco expected to place orders by early summer for about 20 new production platforms and decks to be installed at the Marjan, Zuluf, Berri and Safaniya fields, in a multi-billion-dollar programme.

Major offshore field developments will be a feature of the GCC oil and gas sector. Denmark’s Maersk Oil & Gas is pushing ahead with a $5,000 million programme at the Al-Shaheen field in Qatar, which will see production more than double to 525,000 b/d by 2010. The scheme will be implemented in about 10 separate packages, with $2,000 million worth of contracts for new platforms and decks targeted to be awarded by the fourth quarter. In neighbouring Abu Dhabi, an award is imminent for the $2,000 million EPC contract to fabricate a gas reinjection super-complex at the Umm Shaif field.

An equally ambitious capital expenditure programme is planned downstream. Partner selection is imminent for Saudi Aramco’s two new export refineries at Yanbu and Jubail, while Abu Dhabi Oil Refining Company (Takreer) is close to issuing the project management tender for its 300,000-b/d grassroots refinery in Fujairah. More advanced is the planned 615,000-b/d grassroots Al-Zour complex in Kuwait, where prequalification of EPC contractors for the various packages is almost complete.

The extensive list of upcoming tenders, coupled with the fact that much of the 2005 order backlog is now entering the construction phase, has inevitably raised concerns about available capacity. ‘We are already working at full capacity,’ says one leading offshore fabricator. ‘To be honest, we will spend most of 2006 going after projects to be implemented in 2007.’

Those sentiments are echoed at Seoul-based Daelim Industrial Company. ‘I am more busy declining [invitations to bid] than soliciting them,’ says vice-president JK Park.

Expanding order books have become a feature of the biggest EPC contractors. In the nine months to the end of September, the order book at Paris-based Technip jumped by 90 per cent to be valued at $13,200 million. At the US’ Fluor Corporation, it was up to $14,662 million at the end of September and to $6,235 million at Japan’s JGC Corporation as of late June.

‘2006 will see project demands continuing to tax the industry,’ says a senior official at an Asian EPC contractor. ‘The contracts awarded last year will move into the material procurement and construction phases and this is where contractors will have to rely on outside resources. A lot of them will face the reality of ever-decreasing production/construction capacity margins.’

In recent months, the return of a measure of stability to basic construction material prices has provided some relief. But EPC contractors will continue to be exposed to other market pressures, especially on equipment and manpower. ‘Uncertainty still prevails about the availability of valves and steel pipes, which are manufactured [primarily] in Italy, Japan and Germany.