In addition to the lucrative engineering, procurement and construction (EPC) contracts that the Middle East’s hydrocarbons sector offers international firms, there is a sizeable and expanding market for the operation and maintenance (O&M) of completed facilities.

International oil companies often handle O&M in-house due to the significant technology, experience and skilled workforce at their disposal. The dominance of national oil companies in oil production in the Middle East, however, leaves an important role for oil services firms in this sector.

While not as large as some other oil field services, and engineering and construction contracts, O&M deals can run into hundreds of millions of dollars for periods in excess of five years.

At the end of 2012, the Saudi hydrocarbons industry for the first time outsourced a full-service, seven-year maintenance contract worth $140m-170m for the Saudi Aramco Total Refining and Petrochemical Company (Satorp) refinery in Jubail.

The roles of O&M

Oil and gas producers and refiners employ O&M contractors to control and maintain property and equipment. The US Department of Energy (DOE) defines O&M as fulfilling two primary roles.

The first is focused on scheduling, procedures, and systems control and optimisation. The second is the performance of routine, preventative, predictive, scheduled and unscheduled actions aimed at preventing equipment failure or decline, with the ultimate goal of increasing efficiency, reliability or safety.

For large operations, several O&M contracts can be awarded for different functions of various facilities. For example, the UK/Dutch Shell Group’s Pearl GTL megaproject – a $19bn integrated gas-to-liquids plant based at Ras Laffan, in Qatar – has several O&M contracts awarded on various parts of the complex. The scheme, built in 11 separate EPC packages, was completed in late 2011.

The local Qatar National Facilities Services (QNFS) was awarded the contract to provide maintenance services for the utilities and the gas-to-liquid process sections of the plant. QNFS, jointly owned by Qatar-based Trading and Agency Services and the US’ Fluor, agreed to a five and a half year contract after a competitive tendering process.

At the same time, Madina Group, a joint venture of the local Al-Darwish United Group and UK-based Interserve, won a five and half year contract to provide maintenance services for the offshore, feed gas processing and liquids processing areas.

QNFS and Madina Group are responsible for routine maintenance activities, unit shutdowns, and preparations for turnarounds. Together, the two contractors deployed about 250 staff to work on the Pearl GTL plant to supplement contractors working directly for the operator.

The maintenance contract for the complex’s air separation unit was awarded to Spain’s Grupo Solarca. Meanwhile, the UK-based Hertel Industrial Services was awarded a five-year contract to support general maintenance, shutdowns and minor projects at the complex, employing more than 100 personnel at the site.

QNFS also won a five-year comprehensive maintenance services contract from Qatar-based RasGas Company in Ras Laffan. The contract was awarded in late 2011 to provide maintenance services for the entire RasGas complex, which produces 37 million tonnes a year (t/y) of liquefied natural gas for export to global markets.

A joint venture of US-based KBR and Saudi group ATYB was awarded the seven-year contract from Satorp for the new 400,000-barrel-a-day refinery in Jubail.

The contract value is worth $140m-170m, depending on the services required after the refinery starts up this year. Under the deal, the KBR/ATYB joint venture will deliver full-service maintenance at the refinery.

This includes overall site management and field supervision of a craft workforce covering all mechanical, electrical and instrumentation works.

The joint venture will also provide detailed planning and scheduling services, execution of preventative and predictive maintenance programmes, management of subcontractor activities and procurement of tools and equipment. Additional services include the development, in partnership with Satorp, of reliability and cost-optimisation programmes.

Redefining O&M

The KBR/AYTB joint venture will work in partnership with Satorp to demonstrate a model for delivering services. Jubail-based AYTB believes this contract – the first outsourced a full-service maintenance contract in the kingdom – could change the way these services are contracted in the future.

“This contract could redefine how plant maintenance will be performed in the future. The hydrocarbon processing industry in Saudi Arabia and the region will closely observe the results of such atypical maintenance outsourcing strategy,” said Abdulmohsen al-Ogaili, AYTB chief executive officer at the time of the award. “The partners are committed to realising the intended long-term benefits of this contract and demonstrate a model for delivering services that has not previously been tested in the kingdom.”

If this contract paves the way for further deals in Saudi Arabia, it could become an attractive destination for international companies offering O&M services as the kingdom further expands its downstream and gas sectors.