Firms line up for two $1bn Adnoc oil deals

04 September 2009

International contractors submit technical proposals for upgrades at Bab and Qusawirah oil fields.

International firms have submitted technical bids to Abu Dhabi Company for Onshore Oil Operations (Adco) for two construction contracts worth $1bn each.

The engineering, procurement and construction (EPC) contracts cover infrastructure upgrades and production increases at the state-owned energy company’s Bab and Qusawirah oil fields.

Bidders for the Bab contract include South Korean firms GS Engineering and SK Engineering & Construction; the local National Petroleum Construction Company and the UK’s Petrofac; India’s Larsen & Toubro; Italy’s Saipem; TR of Spain; and Paris-based Technip.

The winning contractor will build the infrastructure to support 53 wells that are being drilled at the Thammam G and Habshan 2 reservoirs within the Bab field.

The work includes linking the wells to flowlines and pipelines, and building water-handling systems and associated utilities.

Of the companies that bid for the Bab deal, only Petrofac failed to submit a proposal for the second contract, to build infrastructure at the Qusawirah field.

The work planned for Qusa-wirah involves building infrastructure to handle output from the 44 wells that Adco is drilling at the field. This includes building facilities to remove gas from the oil, and to reinject the gas into the reservoir.

The firms submitted their bids to Adco on 25 August, one month after Adco’s original deadline of 27 July. The companies asked for a deadline extension because Adco failed to give them the full details of the work involved in time to prepare technical bids.

Adco has set a 24 November deadline for commercial bids, which must outline the proposed cost structure of the contracts. The state oil company is keen to award the contracts before the end of this year.

Regional projects tracker MEED Projects-CMI values both deals at $1bn or more.

Also on 25 August, six engineering firms submitted commercial bids for the project management consultancy (PMC) contract to oversee the construction of infrastructure at the Bab and Qusawirah fields.

Adco has invited the US’ Fluor Corporation, the US/Canadian Veco, the UK’s Amec and Mott McDonald, Australia’s Worley Parsons, and Austria-based ILF Consulting Engineers to bid for the PMC deal.

Adco also extended the deadline for this deal by one month after the engineering firms requested more time during the technical bid round.

Executives at the engineering firms say they expect Adco to award the PMC contract before the end of September.

This is the third time Adco has tendered the PMC deal. In December 2008, the state oil company decided that the engineering firms were charging too much.

All of the deals are part of a wider scheme known as ‘the 1.8 million project’, to boost production at key onshore oil reservoirs by 400,000 barrels a day (b/d) from current levels of 1.4 million b/d. The scheme is in turn a part of Abu Dhabi’s plan to increase its maximum output to 3.5 million b/d by 2019, from its current level of about 2.5 million b/d.

When first mooted in 2005, the 1.8 million project’ covered the development of oil fields at Bab, Bida al-Qemzan, Qusawirah and Ruwais.

In February this year, Adco reduced the size of the PMC deal, and the scope of the project. It also postponed a tender for the Ruwais field, citing falling demand for oil in the short term.

Sources close to Adco say that the state-owned company will probably award the contract to develop Bida al-Qemzan directly to Veco as an engineering and procurement contract, with a second party subcontracted to build the infrastructure at the oil field.

“Veco will do the detailed engineering and run the project like a project management consultant would,” says one Abu Dhabi-based source close to the deal. “Veco is pretty much in final negotiations with Adco right now, and given its links to the project, it seems likely it will get it.”

Contractors expect Adco to award the Bida al-Qemzan contract at about the same time as the main PMC deal.

Construction work at the Bab, Bida al-Qemzan, and Qusawirah sites should start in the first quarter of 2010, with completion slated for 2013.

Adco declined to comment.

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