Iraq shortlists two firms for seawater pipeline management

17 July 2012

Seawater treatment facility and pipeline critical to Iraq’s future oil development

Iraq’s Oil Ministry has shortlisted two companies to compete for a critical project management consultancy (PMC) deal covering the construction of a pipeline and giant seawater treatment facility. The project, to be called the Common Seawater Supply Facility (CSSF), will supply water vital for the development of the country’s oil fields.

Ten firms were invited to bid in May for the PMC contract, but according to sources close to the project, only five responded. Of these, only two have been technically qualified by the Oil Ministry: SNC Lavalin of Canada and the US’ CH2M Hill.

Commercial bids for the CSSF scheme are now to be submitted on 1 August with a planned award in September.

Italy’s Saipem, the US’ Foster Wheeler and Australia’s WorleyParsons also submitted technical bids, according to the source.

Mott MacDonald of the UK and the US’ Fluor were also among the 10 firms invited to bid. The two firms had previously been awarded survey and data gathering contracts by US oil major ExxonMobil, which was leading the development of the facility until April.

ExxonMobil, however, withdrew from its leading role in the water treatment project at the end of February. Since then, preliminary work has stopped and no contracts have been signed for the design work on the facility’s two main packages: a water treatment plant; and a 120-kilometre pipeline.

The facility is intended to produce 2.5 million barrels a day (b/d) of treated seawater from the Gulf, with eventual expansion up to 12 million b/d, to be injected into fields awarded in Iraq’s first and second oil licensing rounds.

Fluor was leading the data gathering and survey work for the main utilities package, including water intake and pumping stations at Qarmat Ali near Basra.

Mott MacDonald was carrying out primary surveys for the water pipelines from the facility, along with theoretical and conceptual studies.

It is still unclear whether another oil major will step in to take over leading the project from ExxonMobil, or if the Oil Ministry will go ahead on its own.

The Oil Ministry formally approved the estimated $10bn scheme in September 2010 and initially hoped the facility would be completed by 2015. By October 2011, the development was almost ready to proceed, in terms of technology, financing and management. It was set to be signed by Iraq’s South Oil Company and the State Company for Oil Projects, as well as the Oil Ministry and the international oil companies (IOCs).

The Initial delays came from disputes between the Oil Ministry and the IOCs developing the southern oil fields over the cost of the project and the timetable for the oil firms to be reimbursed. The oil majors want to be reimbursed once production in the fields affected rises by 10 per cent over their base line. The ministry, however, only wants to start paying the IOCs 23 back when a 20 per cent increase in output is reached.

Another dispute has been over the use of PMC firms. The Oil Ministry has tried to convince the oil firms involved to use a consultant to manage the project from beginning to end, rather than pushing ahead with what it sees as a slower process of awarding pre-front end engineering and design (feed) contracts, followed by separate feed contracts.

“A three to five year schedule was always going to be challenging,” says another source close to the project. “Survey work alone will take 12 to 16 months. Even with shortcuts, it is still a vast area to cover. Then there is the legal wrangling over access rights [and] legal rights to build. This is another eight to 14 months. The seawater intake area will be easier, as it’s more accessible but there are still problems,”

The 2015 deadline could now be missed if design contracts are not signed soon and engineering, procurement and construction tenders launched.

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