IOOC asks for new Kharg NGL FEED, cancels EPC

18 November 2005
Iran Offshore Oil Company (IOOC)has entered negotiations with Narganand Sazeh Consult, both local, to redo the front-end engineering and design (FEED) package for the Kharg island natural gas liquids (NGL) project, after a third tender for the engineering, procurement and construction (EPC) package was abandoned in November. An EPC tender is now unlikely to be launched until mid-2006 and the plant is unlikely to be on stream before late 2008, depriving planned downstream facilities of feedstock (MEED 28:10:05).

The new FEED package is needed because IOOC changed the scope of works relating to both the Kharg jetty and process plants, and will now use Royal Dutch/Shell Grouptechnology rather than the process licensed from France's Totalunder the original FEED carried out by Norway's Aker Kvaerner. In addition, the original turbine supplier Nuovo Pignone, a subsidiary of the US' General Electric (GE), pulled out of Iran last year, which also required changes to the original FEED.

The new FEED will take about six months to complete, but contractors warn that it may need additional work from international engineering groups, which have already declined an invitation to carry out the work.

The decision to negotiate a new FEED package directly was taken after the collapse of a third EPC tender for the project in November. Two groups bid but their financial envelopes were not opened because neither complied fully with the client's technical specifications. The bidders were: Paris-based Technip, with South Korea's Daewoo Engineering & Constructionand Nargan; and the UK's Costain Oil & Gas, with Iran Marine Industries Company (Sadra)and Sazeh.

An olefins unit now under construction at Kharg is likely to be completed in early 2007 but will not receive any feedstock for at least 18 months due to the delay to the NGL plant. That means the National Petrochemical Company (NPC)complex will lose millions of dollars in revenue. It is understood that finding a substitute feedstock would prove very difficult. NPC has attempted to take over the NGL project several times in the past to accelerate its execution.

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