Saudi Arabia looks set to dominate the hydrocarbons engineering, procurement and construction (EPC) market in the Middle East in 2012.

According to the regional projects tracker MEED Projects, the kingdom has about $37bn-worth of oil and gas projects currently under design or construction.

Most packages are at the EPC award stage such as the $18bn Sadara Chemical Company complex at Jubail and the PetroRabigh phase 2 project at Rabigh.

Fresh work

There are also some projects yet to start EPC prequalification and it is those schemes that international contractors will be aiming for in the coming 12 months.

“Qatar and the UAE are slowing down and there is still a long way to go before we really see Iraq opening up to EPC contractors,” says a source from a European contractor based in the Eastern Province. “Saudi Arabia is where everyone is going to be concentrating on this year.”

As usual, Saudi Aramco will be leading from the front regarding new projects in the hydrocarbons sector. However, aside from general maintenance contracts, there will be few major upstream projects in the kingdom in 2012. 

One area where upstream activity is expected is the Neutral Zone between Kuwait and Saudi Arabia. A decision on a $600m upgrade is expected shortly, but it is the $5bn development of the controversial Dorra gas field that has captured the interest of international contractors.

The Dorra field is estimated to contain at least 60 trillion cubic feet of gas and any development would have to be with the full co-operation of Kuwait and Iran.

“The Dorra field would be the biggest offshore project in the region since the Wasit gas development,” says a senior official from a contractor specialising in offshore projects. “If a tender is floated, it will be the one we will pursue the hardest.”

The kingdom’s industrial sector is also looking quiet with few pipeline or bulk plant contracts being tendered in the next 12 months, except for the $600m Shoaiba bulk plant on the Red Sea coast.

Downstream focus

With the kingdom not increasing its current production capacity of 12.5 million barrels a day until the Manifa field goes onstream in 2015, it is instead concentrating on substantially increasing its downstream capacity.

Apart from the megaprojects being tendered, there is a series of refinery upgrades and new builds that are currently at the front-end engineering and design stage and which look likely to reach EPC tender this year.

The largest is the $7bn Jizan refinery and Aramco is expected to issue tenders towards the end of the first quarter. All Aramco’s fully owned refineries – Riyadh, Yanbu, Ras Tanura and Jeddah – are undergoing major rehabilitation work to bring them in line with international standards on sulphur content in refined products.

This work will be awarded to EPC contractors over the next 12-18 months with some substantial packages being tendered. 

Aramco’s domestic joint ventures are also investigating clean fuels initiatives to achieve the same goal.

“A lot of the rehabilitation work on these refineries will require contractors with a good track record in brownfield projects,” says the European contracting source. “If a contractor can offer minimal disruption to the current operations then it will put them in a strong position to win the work.”

One question contractors will be asking this year is whether the South Korean dominance of the contracting market can be broken.

Early indications from projects close to EPC award announcements point to continued success of South Korean contractors in the Middle East in 2012.