Kuwait refinery bidders must justify their price

22 February 2015

Central Tenders Committee questions the low-bidder on Al-Zour package five

  • The low bidder is a consortium of Hyundai E&C, Saipem, and Essar
  • The low bid is $1.55bn, nearly twice the $850m budgeted
  • Contract is scheduled to be awarded in early May, but insiders expect delays

The low-bidding consortium on the marine package for the Al-Zour New Refinery Project has been asked by Kuwait’s Central Tenders Committee (CTC) to justify its price.

Representatives from the consortium, made up of South Korea’s Hyundai E&C, Italy’s Saipem, and India’s Essar, met with CTC officials on 11 February.

According to a source close to the discussions the consortium was asked to give reasons for the consortium’s bid of $1.55bn, nearly twice the $850m budgeted for the package.

Consortium representatives said that the current budget for the project dates back to 2007 and does not take into account changes to the scope of the project or increases in labour and materials costs, according to the source.

The contract for the marine package, which is also known as package five, is scheduled to be awarded in early May, but insiders are expecting delays due to the low bid coming in higher than the estimated budget.

If the low-bidding consortium wins the contract it will be responsible for construction of a harbour, including a sulphur pelletising and conveying system, subsea outfall lines and an offshore island capable of birthing tankers.

US-based McDermott, Korea’s Daewoo, and Britain’s Petrofac were also contacted by Kuwait’s CTC.

They were asked why they did not submit a bid on the project after prequalifying.

The second and third-lowest bidders were not questioned by CTC, according to the source.

The full bidders list on package five is:

Earlier this month, the bid deadline for the Al-Zour New Refinery Project packages one, two and three was extended until 10 March.

The Al-Zour scheme is one of several Kuwaiti oil and gas projects that have seen delays during the tendering process over recent weeks.

Others include Kuwait Oil Company’s (KOC) $300m Main Pipeline Manifold Gathering System project and KNPC’s project to build a fifth gas fractionation train at the Mina al-Ahmadi refinery.

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