JGC withdraws from Kharg

25 June 2004
Plans by Iran Offshore Oil Company (IOOC) to carry out the $1,260 million Kharg island gas gathering and natural gas liquids (NGL) projecthave suffered a setback following the decision by the foreign partners in the nominated engineering, procurement and construction (EPC) consortium to withdraw from the project (MEED 19:3:04).

Industry sources say that consortium leader JGC Corporationof Japan and its South Korean partner, Daewoo Engineering & Construction, pulled out of the contract after rising steel and transportation prices left the companies unable to carry out the lump-sum turnkey (LSTK) contract at the price submitted last December. It is understood that the two local consortium partners, Iran Marine Industries Company (Sadra)and Sazeh Consult, are now searching for potential international partners, as they remain committed to fulfil their contractual obligations. However, sources close to the project say that IOOC, a subsidiary of National Iranian Oil Company (NIOC), is attempting to bring both JGC and Daewoo back on board.

'IOOC still wants the [JGC-led] consortium and is trying to convince them to come back on board,' says a source close to the project. 'At the moment there is no intention by the client to retender the project as all EPC contractors are in a similar situation when it comes to prices.'

The consortium led by Japan's Mitsui & Company, which is mandated to arrange financing for the onshore portion of the Kharg project, is also keen on retaining the JGC group, which is considered technically stronger. IOOC chose the JGC-led team in March over another consortium comprising Japan's Kawasaki Heavy Industries, Sharjah-based Petrofac Internationaland Kayson Groupand Jahanpars, both local, which submitted a lower price but had a lower technical ranking.

However, there are no indications that JGC is willing to return to the scheme. The project has already been held up by more than a year after bidding and budgetary problems repeatedly led to delays.

The Kharg project will produce 262 million cubic feet a day (cf/d) of liquefied petroleum gas (LPG), 2,280 tonnes a day (t/d) of ethane, 2,196 t/d of propane, 1,525 t/d of butane, 2,443 barrels a day (b/d) of pentane and 4,811 b/d of condensates. Under the feasibility study prepared by the UK's John Brown, the project will deliver an annual turnover of $436 million. The project aims for ethane recovery of 90 per cent and propane recovery of 95 per cent.

The ethane will feed a cracker at Kharg petrochemical complex now under construction and the methane will feed a methanol plant at the same complex, which is presently being retendered (MEED 11:6:04).

A MEED Subscription...

Subscribe or upgrade your current MEED.com 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