Kuwait delays heavy oil tender

09 May 2010

Prequalification deadline pushed back by a month

Kuwait Oil Company (KOC) has extended the deadline for the submission of prequalification documents for a deal to build heavy oil handling and processing facilities by four weeks to 30 May.

The state-run oil producer did not give a reason for the extension. Local and international firms were first invited to prequalify for the estimated $2bn deal to build, operate and maintain the temporary heavy oil handling facilities in the north of the country on 21 March.

Despite the delay, the tender has been seen as a sign Kuwait intends to develop the technically complex heavy oil production facilities without the assistance of international oil companies (IOCs). Kuwait had originally planned to develop the field with the help of an IOC, and signed a heads of agreement with the US’ ExxonMobil in 2007, but no progress on that agreement has been made.

Kuwait has an estimated 13 billion barrels of heavy crude oil reserves, located primarily in the north of the country. KOC had planned to increase production of heavy oil to as much as 900,000 barrels a day (b/d) by 2020. However, the company said in late 2009, it was only targeting 450,000 b/d from heavy oil. The number has been drastically cut again, with sources in Kuwait now saying the heavy oil target is as little as 250,000 b/d.

When complete, 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.

The project will be broken down into three parts. The first covers the construction of heavy crude oil handling facilities for thermal production techniques, including steam and production flow lines. The second part will see the winning contractor build seawater treatment and water de-oiling and de-mineralisation facilities, as well as an effluent disposal system. The final package covers the operation and maintenance of the facilities.

The winning firm will be required to provide financing for the heavy oil facilities project, which could cost as much as $2bn, according to contractor sources (MEED 30:3:10).

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