Saudi Aramco and ConocoPhillips start cost talks on Yanbu refinery

11 March 2010

Both partners want best prices for $9bn Red Sea oil scheme in Saudi Arabia

The partners behind the planned $9bn-plus Yanbu export refinery on Saudi Arabia’s Red Sea coast plan to start talks over the price of key construction deals in an effort to cut the cost of the project.

Saudi Aramco and the US’ ConocoPhillips have completed their evaluation of the prices international engineering firms submitted in an 8 February bid round and have approached the low bidders to try and get the best prices possible, sources at the companies concerned tell MEED.

Talks are expected to begin on 8 and 9 March, with awards scheduled for the second quarter of the year.

Aramco is understood to want to push the price of the project down from that of a similar 400,000 barrels a day refinery project at Jubail. Aramco and France’s Total awarded a total of $9.6bn of contracts on the scheme in 2009 (MEED 2:3:2010).

“This is pretty much standard practice for Aramco projects now, and they want to get the best price possible,” says a source close to the project. “They will probably approach the first, second, maybe even third lowest bidder over the price.”

South Korea’s GS Engineering & Construction is the frontrunner to win the engineering, procurement and construction (EPC) contract for the hydrocracker unit after submitting the lowest price for the deal in February, followed by another South Korean firm Daelim Corporation.

A consortium of Japan’s Chiyoda and South Korea’s Samsung Engineering & Construction are the frontrunners to win coker unit, followed by Spain’s Tecnicas Reunidas. South Korea’s Hyundai Engineering & Construction was the lowest bidder for the crude processing facility, undercutting Samsung and a consortium of Italy’s Saipem with Taiwan’s China Technical Consultants. Tecnicas Reunidas is the frontrunner for the gasoline processing unit followed by Paris-based Technip (MEED 11:2:10).

A fifth EPC deal, to build storage tanks at the refinery, is being contested by two firms, South Korea’s Hanwha and China’s Wilson Shanghai who both submitted bids of around $500m. Bids for a solids handling unit at the plant are due in by 22 March.

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