State-upstream operator, Kuwait Oil Company (KOC) has issued a long-awaited tender for the construction of heavy crude oil production facilities in the north of the country.

One of the largest upstream projects in the region, KOC has set a 26 January deadline for the submission of bids for the first phase of the Lower Fars heavy oil development, a deal worth an estimated $4.2bn.

The company has also set a bid bond of KD5m ($17.7m). Tender documents are available from 27 October.  A pre-tender meeting is planned for 18 November, and bidding firms will have until 16 December to submit any queries.

The single engineering, procurement and construction (EPC) tender includes five main parts covering a steam injection facility, production facilities, a support complex, tank farms and a 270,000 barrel-a-day (b/d) pipeline to transport the heavy crude to the planned new refinery in the south of Kuwait.

KOC has prequalified 19 EPC firms to bid for the deal.

Lower Fars heavy oil development prequalified EPC firms
Company Country
Aker Solutions Norway
Chiyoda Corporation Japan
Consolidated Contractors Company Athens-based
Daelim Industrial South Korea
Dodsal Dubai-based
Foster Wheeler US
GS Engineering & Construction South Korea
Hyundai Engineering & Construction South Korea
Hyundai Heavy Industries South Korea
JGC Corporation Japan
KBR US
Lurgi Germany
Petrofac UK
Saipem Italy
Samsung Engineering South Korea
SK Engineering & Construction South Korea
SNC Lavalin  Canada
Technip France
Tecnicas Reunidas Spain
Source: Central Tenders Committee

Australia’s Worley Parsons has been appointed as the project management consultant for the heavy oil deal, although a contract value has not been announced.

Spread over 1,200 square kilometres in Kuwait’s northern desert, the Lower Fars reservoir contains between 7 billion and 15 billion barrels of oil in place.

The Lower Fars reservoirs contain heavy oil with a gravity ranging from 17 API to as low as 11, compared with Kuwait’s regular crude blends, which have an average gravity of about 30 API. It is also highly viscous, in the range of 200 to 1,000 centipoise (CP).

To address this, the project will use the cyclic steam stimulation (CSS) technique, where steam is injected into the reservoir to heat the highly viscous oil, making it easier to pump to the surface.

Based on its reservoir engineering work, KOC has proposed phase one be developed using two or three cycles of CSS, followed by continuous steam flooding. The steam will be produced by several generators at the planned central processing facility (CPF).

Heavy oil from the CPF will be sent without any blending through a new pipeline to the planned New Refinery at Al-Zour, or blended with lighter oil so it can be sent to export markets.

The development has been split into phases, with phase one comprising two well blocks intended to reach a plateau production rate of 60,000 b/d over a 10-year period from the start of operations. In total, the well blocks contain more than 1,300 wells. Further phases will ramp up production to a final plateau of 270,000 b/d.

The scope of the current tender covers a CPF, satellite stations, two well blocks, trunk lines and steam lines, crude oil, gas and water export pipelines, new storage tanks capable of holding 1.2 million barrels of oil, manifolds, pumps and a new crude oil control centre.

The tender comes almost six years after KOC signed a landmark heads of agreement with US oil major ExxonMobil for the Lower Fars heavy oil development. Under the terms of the deal, ExxonMobil was to provide assistance for long-term production of 700,000 b/d of heavy oil under an enhanced technical services agreement.

However, the deal never progressed, leaving KOC to develop the project on its own. It also subsequently revised its heavy oil output targets. Kuwait had originally planned to produce as much as 700,000 b/d of heavy oil. This target has now been significantly scaled back, with KOC planning to ramp up production to 60,000 b/d by 2017, 120,000 b/d by 2020, and as much as 270,000 b/d by 2030.

With a budget of $4.2bn, the Lower Fars heavy oil development is one of the largest upstream EPC projects planned in the region. Although its production target is relatively modest, the fact that it is planned as a single EPC project sets it apart.

Saudi Arabia launched the Manifa Arabian Heavy Crude Programme in 2008, worth a total of $9.28bn, although this was spread over several EPC packages and contractors. The Manifa scheme aims to add 900,000 b/d of heavy crude production capacity by 2015. The main CPF contract was awarded to Japan’s JGC Corporation for $2.2bn.