Local firm wins $1bn Saudi Aramco pipeline packages

01 February 2016

State oil company awards three contracts on Master Gas System Expansion

Saudi KAD Construction has been awarded three pipeline packages on Saudi Aramco’s Master Gas System Expansion (MGSE) worth a total of about $1bn, according to sources familiar with the project.

The Al-Khobar-based company was vying with several overseas firms for the engineering, procurement and construction (EPC) contracts after bids were submitted in May 2015. 

The packages are part of the second phase of the MGSE, which is designed to increase Aramco’s capacity to transport gas across the kingdom.

In November 2015, China’s Shandong Electric Power Construction Corporation (Sepco) won an estimated $750m EPC deal on the compressor booster station for phase two of the MGSE. The second phase of the expansion is expected to be completed by the end of 2018.

The three pipeline packages won by KAD Construction are:

Package 1: Western Province pipeline

The main scope of works includes the construction of 422 kilometres of 56-inch pipeline on Aramco’s East West Pipeline 2

Package 2: Central region pipeline

Scope includes the construction of 226km of 46-inch pipeline on the East West Qassim Gas Pipeline 1.

Package 3: Eastern Province pipeline

Scope includes the construction of 150km of 56-inch pipeline on the Shedgum Riyadh Gas Pipeline 3, as well as 40km of 56-inch pipeline on the Shedgum Riyadh Gas Pipeline 2.

Package 4, named East West Pipeline 1 upgrade, has been cancelled, according to sources familiar with the scheme. The scope of the package comprised upgrade works on 10 sections of the existing pipeline covering 51 kilometres.

Aramco is thought to have favoured Saudi KAD Construction over a close rival bid by a consortium of Italy’s Saipem and Athens-based Consolidated Contractors Company (CCC).

Other bidders for one or more packages were thought to include Lebanon’s CAT Group, UAE-based Dutco McConnell Dowell and Turkish group Tekfen Holding.

According to one industry source, Aramco favoured Saudi KAD Construction as its proposal called for engineering and procurement activities to be carried out inside the kingdom.

“In this case 100 per cent of the value of the project would be spent in Saudi Arabia to contribute to local execution,” the Saudi-based source told MEED, adding that international firms usually handle engineering and procurement outside the country.

“This is a very strong message from Aramco to everyone that it is going forward with its push to advance local execution,” the source added.

The first phase of the MGSE is under execution after several awards were made by Aramco in 2014. These include pipeline deals to Italy’s Saipem, the UAE’s Dodsal, and CAT Group, as well as a $1.3bn deal to Sepco for the construction of two booster gas compressor stations.

The first phase will boost the MGSE’s capacity to 9.6 billion cubic feet a day (cf/d) from 8.4 billion cf/d. The second phase will expand the capacity further to 12.5 billion cf/d.

Aramco is investing billions of dollars in increasing its gas production for domestic use. This includes associated and non-associated output, as well as non-conventional forms of the resource, such as tight gas.

The Master Gas System is operated by Aramco and is one of the world’s largest hydrocarbons networks. Construction started on the scheme in the mid-1970s as a means to transfer gas across the kingdom to support industrialisation. The system became fully operational in 1982 and allows Aramco to market all of its gas domestically. 

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