Saudi Arabia's oil and gas project awards rise in 2012

31 December 2012

Contract awards made in 2012 were up more than 9 per cent on 2011

Engineering, procurement and construction (EPC) contract awards in Saudi Arabia’s oil and gas sector have risen by more than 9 per cent in 2012 as the kingdom’s hydrocrabons sector remains the focus of substantial investment.

According to Middle East projects tracker MEED Projects, there were $8.95bn-worth of contract awards in the oil and gas sector in the second half of 2012, compared with only $884m in the first half.

The kingdom’s refining sector was the major source of activity in the second half of the year, with both the $7.5bn Jizan Refinery Project and the $1bn Saudi Aramco Lubricating Oil Refining Company (Luberef) project awarding substantial contracts. The Luberef and Jizan projects mean that the kingdom’s oil and gas sector made awards totalling $9.8bn in 2012, a 9.25 per cent increase on the $8.9bn awarded in 2011.

The Jizan refinery will have a capacity of 400,000 barrels a day (b/d) when completed in 2017 and is the last of Aramco’s world-scale greenfield refinery programme that was devised to boost domestic refining capabilities by more than 1.5 million b/d.

“The [oil and gas] sector in the kingdom is still being dominated by downstream projects and that is likely to last well into 2013,” says an oil industry executive working in Saudi Arabia. “Aside from some gas initiatives, the major projects in 2013 will also be in the downstream sector.”

The kingdom’s upstream oil and gas sector has continued to stagnate during 2012. In the last 12 months, there has been only three projects valued at more than $100m awarded. However, in 2013, there will be increased activity in this sector as Aramco further ramps up investment in gas production.

The $800m Midyan gas scheme should be awarded in early 2013. In the Divided Zone between Saudi Arabia and Kuwait, the $2bn-plus Dorra field development is finally expected to start making progress. Other major projects in 2013 include major refinery rehabilitations at Ras Tanura and Riyadh, as well as major upgrade work to the Saudi Arabia’s pipeline network.

During 2012, South Korean firms remained the dominant force in the oil and gas sector. In late October, South Korea’s Samsung Engineering was awarded the EPC contract for Luberef in a deal worth $871m. Saudi Aramco’s greenfield Jizan refinery awarded seven contractors EPC packages for the scheme in the remote south western area of the kingdom.

The successful contractors on the Jizan refinery were:

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