Kuwait yet to decide on Lower Fars

19 November 2014

Contractors say it could be weeks or months until contract is awarded

Upstream operator Kuwait Oil Company (KOC) is in the final stage of its decision-making process ahead of awarding the engineering, procurement, and construction (EPC) contract for the multi-billion-dollar Lower Fars Heavy Oil (LFHO) development project, according to EPC sources working with the state oil company.

“Kuwait Oil Company has indicated that it is in the final stage of the decision making process, but it could still be weeks or months until the contract is awarded,” said one of the EPC sources, who requested to remain anonymous as he is not authorised to speak to the media.

“So far work on the award is proceeding at a steady pace, but there is always the possibility of delays,” the source added.

Bids were submitted on July 15 with the UK’s Petrofac coming in as lowest bidder with a bid of $4.3bn.

The other bidders were:

  • SK Engineering & Construction ($4.5bn)
  • Eni Saipem ($6bn)
  • GS Engineering & Construction ($6.3bn)

The single EPC tender is for the first phase of the project’s development and includes the construction of 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 at Al-Zour in the south of Kuwait.

This initial phase of development will comprise two well blocks that are expected to reach a plateau production rate of 60,000 b/d over a 10-year period from the start of operations. In total, the blocks will contain more than 1,300 wells. Further phases are expected to ramp up production to a final plateau of 270,000 b/d.

State upstream operator KOC first issued a tender for the phase one facilities in October 2013 and the deadline for bids had been repeatedly delayed. The initial deadline for submissions was 26 January 2014.

The Lower Fars reservoirs contain heavy oil with a gravity ranging from 17 API to as low as 11.

Kuwait’s regular crude blends 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.

In October 2007 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.

The deal never progressed, leaving KOC to develop the scheme on its own. It also subsequently revised its heavy oil output targets. The country 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.

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