Saudi Aramco awards contracts at $7bn Jizan refinery

22 October 2012

Japanese and European contractors join South Koreans in winning contracts at downstream project in Saudi Arabia

Saudi Aramco has awarded seven contractors engineering, procurement and construction (EPC) packages at the $7bn Jizan refinery project in the south of Saudi Arabia.

Aramco announced it had made the awards via its website on 21 October.

The successful contractors are:

  • Hanwha Engineering and Construction (South Korea): Marine facilities
  • Hitachi Plant Technologies (Japan): Utilities
  • Hyundai Heavy Industries (South Korea): Sour water stripper unit and amine regeneration unit
  • JGC Corporation (Japan): Naphtha & aromatics
  • Petrofac (UK): Tank farms
  • SK Engineering & Construction (South Korea): Crude distillation/vacuum distillation unit
  • Tecnicas Reunidas (Spain): Hydrocracker/diesel hydrotreater

The success of Japanese and European contractors in winning contracts came as a surprise to some contracting sources, who had expected the award list to be dominated by South Korean firms.

“I had heard that some of the contractors had bid aggressively and I assumed that this was the [South] Koreans,” says an oil and gas executive based in Saudi Arabia. “It is a surprise to see such a diverse mix of countries in the award list.”

Several international contractors were prequalified to bid on all, or most, of the packages made available by Aramco. However, many have cited increased costs and higher risk as reasons for declining to participate in the bidding process for some of the work.

“Four contractors were prequalified to bid on all of the packages,” says the oil and gas executive. “Of those four, only SK Engineering & Construction picked up any work.”

The other three contractors prequalified to bid on all of the packages were South Korea’s Daelim Industrial and GS Engineering & Construction and Italy’s Saipem.

The budget is believed to have come in at slightly less than the original $7bn estimate, but that is partly due to the sulphur recovery and treatment facilities, as well as the flue-gas desulfurisation being merged with the proposed integrated gasification combined cycle (IGCC) power plant package.

“Aramco were never going to be able to shave $2bn off the deal like they did with similar projects in Jubail and Yanbu,” says a contracting source familiar with the scheme. “Jizan is a remote location and this means added costs.”

The refinery will have a capacity of 400,000 barrels a day (b/d) when completed in 2017 and will be wholly owned by Aramco. Due to the distance between the oil fields and Jizan, crude and the subsequent refined products will not be transferred by pipeline, but will enter and leave exclusively through the marine terminal.

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