Saudi Aramco plans long-term offshore deal

15 May 2014

Four firms will be awarded five-year contract for oil major’s offshore hydrocarbon assets

Saudi Aramco is planning to release a tender to engineering, procurement and construction (EPC) companies for the long-term contract to carry out work on the state-owned oil major’s offshore oil and gas facilities.

The US’ McDermott and Italy’s Saipem are the current signatories of the long-term contract, but that will expire in 2015. Aramco expects to ramp up its offshore maintenance and rebuilding programme over the next five years and is looking to sign a deal with four EPC contractors.

The company has invited more than 30 firms to prequalify for the contract, which will last for five years with the option of a three-year extension. The list is international, with Europe, the US and Asia all well represented.

Wider scope

“[Aramco] has invited a lot of companies and many of these are newcomers to the Saudi market,” says an oil and gas executive based in the kingdom. “There is a lot of offshore work that needs to be done and this means the long-term contract has to be wider in scope than before.”

Aramco will want a pool of contractors because it feels that two is not enough to ensure a proper bidding process for each piece of work. The company does not like to award on a single-source basis for any of its operations. 

Executives from the oil major have visited fabrication yards around the world and have met several contractors in order to attract a world-class bid list for the deal.

Sources are also indicating Aramco will be open to a mix of national and international EPC contractors in order to strike a balance between increasing domestic engineering capabilities and getting value for money.

“It is a fact that there just aren’t enough local engineers available in the Eastern Province,” says a source from an international contractor. “So why pay a premium to relocate expats when you can get the work done in international offices?” 

The contract will run alongside the Maintain Potential Programme (MPP), which is Aramco’s long-term contract for engineering, design and project management of its offshore operations.

Commercial submissions

MEED reported in late April that Aramco was set to ask prequalified engineering consultancies to submit commercial terms early in the third quarter of 2014 for the next MPP deal.

The large document submitted to Aramco as part of the prequalification process now counts as the technical submission. All that remains is for commercial proposals to be submitted.

Like the EPC contract, the new MPP contract is going to be much broader in scope and is likely to involve more than one company. Aramco is considering a new strategy for the MPP that would involve two engineering firms sharing a broader project management consultancy (PMC) contract.

The reason for this is to give the government-owned oil major more flexibility and enable it to have faster response times to problem-solving.

Australia’s WorleyParsons is the current holder of the MPP contract and has employed 350 dedicated staff on the scheme since 2003. It was awarded a two-year extension in 2013 that will expire in 2015.

Aramco has extensive offshore operations on the kingdom’s Gulf coast including Safaniya, the world’s largest offshore oil field, and several large non-associated gas fields.

Many of the fields are mature and likely to require extensive rehabilitations over the next decade to maintain production. Hundreds of new wells need to be drilled every year to maintain operations in shallow-water fields. 

The oil major is also carrying out seismic surveys on the Red Sea coast, although any potential production is still expected to be several years away.

Prequalifiers for the MPP

  • Amec (UK)
  • Fluor (US)
  • Foster Wheeler (US)
  • KBR (US)
  • Mustang Engineering (US)
  • SNC Lavalin (Canada)
  • WorleyParsons (Australia)

MPP=Maintain Potential Programme.

Source: MEED

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