Kuwait awards $71m in June upstream contracts

04 July 2012

Contracts worth less than half the 2011 award figure

Kuwait Oil Company (KOC), the Gulf state’s upstream operator has awarded only $856m worth of contracts, less than half the value of contracts awarded in 2011 and a fraction of the $11.6bn contracts signed in 2010.

According to the latest data released by KOC, thirteen contracts were awarded in June, worth a total of just $71m. The largest of these was a KD8.4m ($29.9m) deal with Jebel Ali-based Smith International Gulf Services. Signed on 25 June, the contract involves the provision of fishing services for KOC’s drilling and work over operations. This involves the removal and handling of debris from a wellbore.

A KD4.8m contract was also signed with the local Al-Kout Industrial Projects Company for the supply of hydrochloric acid and other chemicals. Canada’s Sander Geophysics Limited also won deal for on and offshore airborne gravity and magnetic surveys worth KD2.1m.

KOC’s contract awards have been relatively small so far this year. Of the 67 contracts awarded, only three contracts have been worth more than $100m. The largest came in January with the signing of a $184m deal with the US’ Westerngeco International for 3D seismic surveys. The other two were for sucker rod pumping services with Vulcan and the construction of the new Al-Tameer building with the local Khalid Ali al-Kharafi & Brothers.

Only two engineering, procurement and construction (EPC) deals have been awarded this year. One was a $27m deal with the local KCC Engineering & Contracting Company and the second was $45m with the local Khalifa al-Daij al-Dabbous & Brothers Company. Both contracts are for pipeline construction.

Twenty-two deals are currently under evaluation and another 80 contracts are due to be awarded before the end of the year. These include five EPC projects with a budget estimated at $625m.

The largest of these is an estimated $208m deal to build an electrical submersible pump network in the north of Kuwait. The systems are used to aid the flow of oil from the reservoir to the wellhead, particularly when natural pressure is insufficient to force the trapped oil to the surface. The UK’s Petrofac submitted the lowest bid in early March.

By this stage of 2011, KOC had awarded $1.5bn and $4.8bn in 2010. The sustained drops in contract award values come despite Kuwait’s commitment to increasing oil production capacity to 4 million barrels a day (b/d) by 2020 from around 3.15 million b/d in 2011.  Sources in Kuwait say this is the result of continued political instability which resulted in the dissolution of yet another parliament in early-June and the reluctance of the Oil Ministry to commit to spending.

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