The GCC oil and gas projects market looks to have continued its fourth quarter acceleration into 2013, driven by major offshore spending in Abu Dhabi.
Almost $8.5bn-worth of engineering, procurement and construction (EPC) contracts were awarded in the six-country bloc’s oil and gas sector in the fourth quarter of 2012 – more than the previous three quarters put together.
Fourth-quarter spending was dominated by awards for packages on Saudi Aramco’s Jizan refinery on and the expansion of the Luberef Yanbu refinery, both on Saudi Arabia’s Red Sea coast.
However, in the first three months of 2013 spending is expected to far outstrip the end of last year, as the UAE’s ambitious offshore development plans come to a head. Offshore projects will make up the bulk of Abu Dhabi’s efforts to increase its crude capacity to 3.5 million barrels a day (b/d) from today’s estimated 2.6 million b/d.
The UAE could award as much as $10bn in oil and gas EPC contracts in the first quarter out of just over $13bn forecast for the whole of the GCC – a quarter-on-quarter increase of 54 per cent.
UK-based Petrofac won the first major offshore deal of the quarter, with the $515m third package on Abu Dhabi Marine Operating Company’s (Adma-Opco) Satah al-Razboot (Sarb) full field development.
The larger fourth package is also set to be awarded this quarter. After commercial bids were submitted in early January, it emerged that South Korea’s Hyundai Engineering & Construction had submitted the lowest bid of about $1.88bn.
Frontrunners have also emerged for two packages on the Umm al-Lulu offshore field, which Adma-Opco is developing in tandem with Sarb. UAE-based National Petroleum Construction Company (NPCC) and Italy’s Saipem submitted the respective low bids on the project’s first and second packages worth a combined $2.4bn, according to market sources.
The largest package due to be awarded is Zakum Development Company’s (Zadco) second major package on the Upper Zakum offshore field development.
The bidding stage for the package has been a drawn-out process, with Zadco asking contractors to resubmit commercial bids in late December due to changes in the budget.
South Korea’s Hyundai Heavy Industries (HHI) – which submitted the lowest bid in September 2012 – has now been replaced by Petrofac as the frontrunner for the contract. Petrofac, which bid in consortium with South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME), bid $3.79bn for the deal.
UAE offshore spending is likely to continue further into 2013, albeit at a lower rate, as Adma-Opco prepares to tender the full field development of a third field, Nasr, later in the first quarter.
The sheer amount being spent on these projects will give subcontractors and service industries in the UAE a much-needed boost in the coming years.