First contractors come on board for Pearl GTL scheme

12 May 2006
The Royal Dutch/Shell Group has countered speculation surrounding its integrated gas-to-liquids (GTL) project at Ras Laffan, by writing to all its potential suppliers and contractors reassuring them that there has been no slow down in its preparations for the Pearl GTL scheme. The move came after early May reports suggested that increasing costs and a tight contractor market could lead to delays in the multi-billion dollar project for which a final investment decision is expected to be taken later in the year.

As evidence of the progress being made on the project, Shell informed its contractors and suppliers that the first two construction contracts, covering site preparation and the material offloading facility, had recently been let. Abu Dhabi-based Al-Jaber Group has been awarded the site preparation contract, valued at $50 million-100 million. The material offloading facility, worth $30 million, has gone to Geneva-registered Archirodon Construction (Overseas). The 15-month project, which covers the construction of heavy load berths, a roll-on, roll-off (ro-ro) facility and access roads, will be key in the project's implementation, allowing materials to be directly imported into Ras Laffan, thus avoiding logistical bottlenecks in the industrial city.

Several other orders have been placed by Shell. Last year, contracts were signed for the first 12 GTL reactors, each weighing over 1,000 tonnes. Contracts have also been let for drilling rigs and subsurface well materials.

Commercial bids were submitted in April and technical clarifications are now under way for the main engineering, procurement and construction (EPC) packages on Pearl GTL. These include three of the largest contracts on the development, the liquid processing unit, the feed gas preparation (FGP) facility and the air separation units. Main contract awards are expected in August (MEED 28:4:06).

Pearl GTL has been the subject of considerable speculation since 4 May when Shell said that it may have to delay, without specifying, some of its longer term projects in view of rising construction costs. At the time, chief executive officer Jerome van der Veer also confirmed that a final investment decision had still to be taken on Pearl GTL.

'The costs in the Middle East have gone up,' he said 'This new gas-to-liquids project is in the Middle East. That is exactly one of the reasons why we do those detailed studies and we stick to the final investment decision.'

With prices now in for the main EPC contracts, Shell will have a much better understanding of the total costs for Pearl GTL, which when it was launched back in mid-2004, was estimated at $5,000 million-6,000 million. Other major Gulf energy projects launched at around the same time, and in particular the Rabigh refinery scheme in Saudi Arabia, have witnessed significant cost escalations.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications