Saipem is the frontrunner for Kuwait oil booster deal

10 February 2010

Contract worth $900m set to be the biggest deal in four years

Italy’s Saipem is the frontrunner to win Kuwait’s biggest oil and gas contract in four years, a $900m-plus contract to build a new oil booster station in west Kuwait, according to sources close to the project.

Five international firms submitted bids for the engineering, procurement and construction deal to Kuwait Oil Company (KOC) on 9 February, with Saipem’s price of KD261m ($905.6m) coming in at the lowest.

The other four bidders, in order of price, are the UK’s Petrofac, and three South Korean firms, Daelim, Hyundai Engineering & Construction, and SK Engineering & Construction.

Kuwait’s Central Tenders Committee (CTC) is due to open the firms’ technical and commercial proposals on 10 February. If there are no issues with Saipem’s bid, the company should be awarded the deal swiftly, according to engineering executives close to the matter.

The contract covers the construction of a new booster station, BS-171, in the west of the country. Station BS-171 comprises three high and low-pressure gas trains, each capable of processing 125 million cubic feet a day (cf/d) of sour gas.

The gas will come from the existing gathering centres 17, 27, 28 and the new gathering centre 16. The BS-171 contract will also cover an extensive pipeline network from these units to the booster station.

If the deal goes ahead, it will be the biggest contract to be awarded in the oil and gas sector in the emirate since South Korea’s Hyundai Heavy Industries won the $1.24bn contract to build a crude oil export terminal at Mina al-Ahmadi in the fourth quarter of 2005.

Although five $1bn-plus construction contracts were awarded as part of plans to build a new refinery at Al-Zour in April 2008, they were cancelled in March 2009 after Kuwaiti parliamentarians called into question the way they had been awarded (MEED 16:3:09).

MEED research shows that KOC awarded about $1.8bn of contracts worth at least $100m each in 2009. However, major $500m-plus contracts such as the booster station, early production facilities in the north of the country, and a new oil and gas gathering centre in the west of the country have suffered significant delays.

In December 2009, the CTC approved a $725m deal to build another booster station, BS-132, in the north of the country. SK submitted the lowest bid for the deal in a September bid round (MEED 16:12:09).

Sources close to KOC say the lack of major awards is due to the cumbersome bureaucracy imposed on KOC by the government and the increasing politicisation of the country’s energy sector.

However, analysts and industry executives are hopeful that this will change in 2010 after the country’s parliament passed a new spending plan and Prime Minister Sheikh Nasser al-Mohammed al-Ahmed al-Sabah faced up to parliamentary questioning in December 2009 (MEED 8:12:09).

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