Kharg NGL race down to the wire

24 October 2003
The race for the $1,000 million contract on the Kharg island natural gas liquids (NGL) project hangs in the balance after the opening of commercial bids by the client, Iran Offshore Oil Company (IOOC), a subsidiary of National Iranian Oil Company (NIOC- MEED 5:9:03).

The consortium led by Japan's Kawasaki Heavy Industries(KHI)and also comprising Sharjah-based Petrofac Internationaland Jahanparsand Kayson Group, both local, has submitted the low bid of $997 million, but quoted for a smaller scope of works. Its technical ranking was also lower than that of the consortium led by Japan's JGC Corporationand comprising South Korea's Daewoo Engineering & Construction Company and the local Sadra, which has bid $1,260 million.

Industry sources say the cost of items not included in the KHI bid - identified as jetties and breakwaters - could approach $200 million. Although the KHI consortium would still be lower on price, NIOC has recently been placing a greater emphasis on technical qualification, where the JGC-led group scored highly.

IOOC is under pressure to select a preferred bidder over the next two months, allowing a contract award in the first quarter of 2004. But before that can happen, the two bidders are likely to be asked to submit revised prices for the contract.

The Kharg scope of works includes the construction of an NGL plant on Kharg island and large sulphur recovery units. The lump-sum turnkey contract includes engineering, procurement and construction (EPC) and project management. The NGL produced will supply a major petrochemicals complex on the island as well as large quantities of condensates for export. Financing for the project is still under negotiation.

A similar but smaller project was recently awarded to the local Oil Industries & Engineering Company (OIEC)for the construction of an NGL plant on Sirri island. The $270 million contract is due to be completed in 2007 (MEED 26:9:03).

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