Kuwait Oil Company (KOC), the Gulf state’s upstream operator has awarded approximately $2bn-worth of contracts in the first three quarters of the year, its lowest in the past four years.
According to the latest figures released by KOC, 12 contracts were awarded in September worth a combined $241m. The largest deal worth $179m was for the supply of drilling and workover rigs and it was awarded to the local Kuwait Drilling Company.
Prior to this, KOC’s biggest contract of the year came in June with South Korea’s Daelim Industrial for the installation of a telemetry system across KOC’s entire consumer network worth $195m.
Some 112 contracts have been signed so far this year, but only eight have been worth more than $100m. The bulk of spending in 2012 has so far gone towards drilling with an estimated $831m, representing 41 per cent of the contracts signed. This is followed by engineering, procurement and construction (EPC) contracts, including civil works, which account for more than $633m, or 31.5 per cent. Exploration activities, such as seismic surveys totalled $192m, or just under 10 per cent of spending.
By October 2011, KOC had awarded $2.2bn and in the same period in 2010, it awarded $8.5bn. The sustained drops in contract award values come despite Kuwait’s plans to increase oil production to 4 million barrels a day (b/d) by 2020 from about 3.15 million b/d in 2011.
On 2 October, KOC signed a contract a $382m EPC contract with South Korea’s SK Engineering & Construction. The deal is the largest single contract signed so far this year, covering the construction of electrical substations in the southeast of Kuwait.
One major deal awaiting signing is KOC’s $200m EPC contract with the UK’s Petrofac, which was approved by the Central Tenders Committee (CTC) on 27 September. Petrofac will build three new substation buildings and lay approximately 900-kilometres of buried cable to connect substations to the electrical submersible distribution system (ESPS) network.Petrofac submitted the lowest bid in early March.
Another 22 tenders valued at more than $138m are still under evaluation with awards expected before the end of the year. With the addition of these deals, Kuwait’s total awards for 2012 is expected to rise to least $2.6bn, matching numbers in 2011.
Nevertheless, this is still well short of the $11bn-worth of upstream contracts awarded in 2010.