Kuwait in talks for Jurassic gas retender

17 September 2013

Fresh blow to Kuwait’s gas production plans

State-upstream operator, Kuwait Oil Company (KOC) is set to make a decision on whether to retender the stalled Jurassic gas scheme in the north of the country, with major implications for Kuwait’s future gas production targets.

Sources in Kuwait tell MEED that after almost three years, the local Kharafi National has not secured financing and is unable to proceed with the project.

Awarded in late 2010, the $1.56bn deal covers the construction of a second phase of early production facilities at the Jurassic field located in the north of Kuwait. The project was aimed at producing 100,000 barrels a day (b/d) of wet sour crude oil and up to 510 million cubic feet a day (cf/d) of gas, along with a sulphur granulation plant.

The scheme is notable for its use of the build-own-transfer (BOT) contracting model, where the plants will be owned by the contractor for a period of five years, before being handed over to KOC. However, this contracting model has also been a major obstacle to its progress.

“The project was supposed to be financed by Kharafi, but the conditions are not favourable. They have not come up with a bankable contract,” says a source close to the project.

“KOC did not like what Kharafi offered. It would be better to do it as a design-build-operate (DBO) project, rather than build-own-transfer (BOT),” adds the source.

Planned for completion in 2013, the EPF-2 project has already been slow to move ahead. Kharafi National signed the UK’s Petrofac as its engineering, procurement and construction (EPC) subcontractor in September 2012, after terminating an early deal with Italy’s Saipem. Kharafi and Petrofac have been working on the front-end engineering and design (feed), but no procurement packages have been released.

“Petrofac put the brakes on and want resolution,” says another source in Kuwait.

“It is a total mess. Kharafi is in. So any new arrangement, even if it is retendered, will have to include them in one form or another,” says Kamil al-Harami, an independent oil analyst based in Kuwait City.

One option for KOC is to ask Kharafi to complete the design work, which will form the basis of a new tender, which Kharafi will be able to bid on again. KOC must now make a decision on whether to retender the deal, dropping the current contracting model that requires financing, or to continue as it is, leaving the project moribund.

The scheme forms a critical part of Kuwait’s hopes of boosting non-associated gas production to approximately 1 billion cf/d by 2016, less than three years away. Production currently comes from two Jurassic gas fields, Umm Niga and Sabriyah, totaling about 50,000 b/d of condensates and 140 million cf/d of sour gas.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications