Gulf oil and gas spending hits long-term high in first quarter

02 April 2014

More than $25bn-worth of contracts awarded as three-month period eclipses total for 2013

Oil and gas contract awards in the GCC and Iraq reached a long-term high in the first quarter of 2014. This was due to a spree of major deals in Kuwait and Iraq, with total spending higher than the total for the whole of 2013.

Engineering, procurement and construction (EPC) awards totalled $25.6bn in the three-month period, compared with $6bn in the corresponding quarter last year, according to regional projects tracker MEED Projects.

The significant upswing in spending at the start of 2014 was driven by two refinery projects that had been delayed for several years in the pre-construction phase.

In January, Iraq’s State Company for Oil Projects (Scop) awarded a $6bn EPC contract to a consortium led by South Korea’s Hyundai Engineering & Construction. The deal involves building a 140,000 barrel-a-day (b/d) refinery at Karbala over the next 54 months, and is the first of several major new refineries in the pipeline in the country.

In Kuwait, the Central Tenders Committee (CTC) approved almost $12bn-worth of deals on its downstream Clean Fuels Project (CFP). Japan’s JGC Corporation, the UK-listed Petrofac and the US’ Fluor Corporation led the group bidding for work on the long-awaited scheme. The CFP covers the revamp of three of Kuwait’s existing refineries to improve their efficiency and meet higher international fuel standards.

A total of $13.1bn-worth of EPC contracts were awarded in Kuwait in the first quarter, making it the biggest spender ahead of Iraq with $9.8bn.

In addition to the Karbala refinery, companies in Iraq issued several contracts on major upstream expansions.

A joint venture of the UK/Dutch Shell Group, Malaysia’s Petronas and state-owned Missan Oil Company (MOC) awarded a major engineering and procurement deal on the second-phase development of the Majnoon oil field in the south of Iraq. The contract was awarded to a joint venture of US engineering firm Foster Wheeler and Ireland’s Kentz Overseas.

Elsewhere in Iraq, significant contracts were awarded on the development of the West Qurna-1 field operated by the US’ ExxonMobil in southern Iraq and the development of the Atrush field by Abu Dhabi National Energy Company (Taqa) in Iraqi Kurdistan.

At the end of the first quarter, South Korea’s Samsung Engineering won an $840m EPC contract on a new degassing station at the Zubair field in the south of Iraq, operated by a joint venture led by Italy’s Eni.

The second quarter of 2014 is also set to be a strong period of oil and gas spending in the GCC and Iraq. Iraq could see major deals awarded on the Siba and Mansouriya fields, the Bin Umar and Nassiriyah oil depots, and the new refinery in Kirkuk.

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