Korean strength tested at Jizan refinery

24 October 2012

South Korean dominance of energy construction projects not as assured as many had thought

Saudi Aramco has made the engineering, procurement and construction contract awards for its $7bn refinery project in Jizan and the results have thrown up some surprising winners.

Three South Korean contractors made the list, but Hyundai Heavy Industries and Hanwha Engineering & Construction would not have been tipped to win packages beforehand.

Two Japanese contractors, Hitachi Plant Technologies and JGC Corporation, also secured contracts while from Europe the UK’s Petrofac was awarded the tank farm and Spain’s Tecnicas Reunidas continued its 2012 winning streak with one package.

Out of the four contractors that were prequalified for all the packages, only South Korea’s SK Engineering & Construction won anything.

Reports that some contractors had not gone in as aggressively as usual regarding their pricing seems to have a ring of truth, with South Koreans firms, such as Samsung Engineering, GS Engineering & Construction and Daelim Industrial, not being successful.

The remote geographical location of the Jizan refinery scheme does mean it was never going to be a cheap project for Aramco to build and the prices of packages seem to match Aramco’s initial budget.

However, this scheme has as much, if not more, significance from a social perspective as it does from an economic, so Aramco is conducting the project in the right way. If this scheme does not offer the same discounts as a similar project in Jubail, so be it.    

Trying to find any sort of meaning in the absence of some of the major South Korean contractors is pointless. The largest package of all, the proposed $2bn-$2.5bn integrated gasification combined-cycle power plant, is yet to be tendered. They could well be saving their lowest prices for that. 

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