Kuwait cancels heavy oil prequalification

12 August 2010

State oil company expected to relaunch tender as EPC deal

Kuwait Oil Company (KOC) has cancelled the prequalification process for an estimated $2bn deal to build, operate and maintain heavy oil handling and processing facilities in the north of the country.

The state-run oil producer did not give a reason for the cancellation. “In this context, the Company conveys deepest gratitude to all companies that applied and showed interest to participate in the prequalification exercise and do business with Kuwait Oil Company”, the company said in a 8 August statement on Kuwait’s official gazette.

Kuwait oil production targets
YearHeavy oil (mb/d)Other (mb/d)Total (mb/d)
f=Forecast. Source: MEED

“They have just cancelled the prequalification. It has not been tendered yet”, said one contractor who submitted prequalification documents on the 30 May deadline.

Some contractors expect the tender to be re-launched as an engineering, procurement and construction (EPC) deal.

“They [KOC] don’t want any mistakes on this, so they want to tender it as a normal EPC deal”, says one contractor who opted not to prequalify for this reason.

The project has already seen prequalification deadlines pushed back twice. Local and international firms were first invited to prequalify for the deal to build, operate and maintain the temporary heavy oil handling facilities on 21 March (MEED 2:4:10).

The deal had been seen as a sign that Kuwait intends to push ahead with the development of the country’s technically complex heavy oil resources without the assistance of international oil companies (IOCs).

The Gulf emirate has an estimated 13 billion barrels of heavy crude oil reserves, located primarily in the north of the country. KOC plans to increase production of heavy oil to about 250,000 barrels a day. The temporary facilities will be used to test the viability of commercial production. KOC will lease them from the winning contractor, over a period expected to be five to 10 years, before permanent facilities are built.

It has been in protracted talks with ExxonMobil for almost four years, signing a heads of agreement with the US-based oil major in 2007, but no further progress on that agreement has been made.The county’s stringent legal framework and poor returns on investment have long made its upstream oil and gas schemes unattractive to the IOCs.

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