Saudi Aramco's $4.6bn Wasit scheme could face major delays

03 May 2012

Problems with density of sulphur in gas fields also means budget could rise by an estimated $600m

Saudi Aramco’s $4.6bn-plus Wasit Gas Development is facing significant delays and the prospect of running $600m overbudget due to issues relating to the density of the sulphur contained in the Arabiyah and Hasbah non-associated gas fields.

Aramco awarded the $2.1bn engineering, procurement and construction (EPC) contract for the Wasit offshore package to Italy’s Saipem in March 2011 with an original completion date of late 2014. Originally two packages were available for the offshore work at the fields, located off the Gulf coast of Saudi Arabia, but were combined to save costs.

“The development of Arabiyah and Hasbah is proving to be very difficult, because the sulphur has a much higher density in these fields than in other non-associated gas fields in the area,” says a contracting source based in Saudi Arabia. “It is a serious problem and needs to be addressed, otherwise [Aramco] will not be able to transport the gas through the pipelines to shore.”

The higher sulphur density in the gas means that unless it is piped at a high temperature, the sulphur will freeze at 115C and cause severe pipeline blockages. High-temperature gas transfer is not a viable option for an offshore non-associated gas field.

“Sulphur is hard to transport. If it cools down, it will freeze and cause blockages to any pipes, so it needs to remain at a high temperature,” says a source from an engineering consultancy based in the kingdom. “It would be very difficult to do that [at the Arabiyah and Hasbah fields] and this is what is causing Aramco and Saipem so many problems.”

Making the sulphur lighter would prevent it freezing and keep the gas flowing, but so far all proposed solutions to do so have failed. Now the offshore package may have to undergo major design changes to accommodate the technology needed to solve the sulphur issue.

The problem means the project could face a delay of at least 12 months, according to sources in the kingdom, meaning a possible new completion date of late 2015. Sources also say Saipem has requested change orders in the original contract worth an estimated $600m.

“This figure is pretty much unprecedented for an Aramco project,” says the contracting source. “In even the most extreme cases, change orders run to [about] 6-10 per cent of the original budget, but in this case $600m of change orders is close to 30 per cent.”

Aramco has now invited international oil companies, such as the UK’s BP and the UK-Dutch Shell Group, to carry out studies aimed at solving the issue. One potential solution involves injecting a cocktail of chemicals into the wells to lighten the sulphur.

Saipem’s original scope of works included the construction of 13 unmanned production platforms with full hydrogen sulphide (H2S) safety features. It also included the construction of central distribution facilities at both fields that will then link with the onshore processing facilities at Wasit in the Eastern Province through a 150-kilometre pipeline.

The delays on the offshore facilities have not yet affected the execution of the four onshore packages being carried out by South Korea’s SK Engineering & Construction (SK E&C) and Samsung Engineering.

SK E&C is carrying out the EPC of the main inlet and gas processing facilities, natural gas liquids (NGL) fractionating column, sulphur recovery facilities and the main supporting utilities, while Samsung is responsible for the cogeneration plant.

It is too early to tell whether the possible delays facing the Wasit programme will affect the kingdom’s industrial diversification plans, if they come to pass. Several major schemes requiring gas feedstock are scheduled to come on stream as of 2015.

According to regional projects tracker MEED Projects, there are $184bn-worth of projects at the study, design, tender or execution phase in the kingdom’s power, petrochemicals, industrial and metals sectors.

Not having the 2.5 billion cubic feet a day (cf/d) the Wasit programme would provide if the scheme is delayed for a year could result in a knock-on effect that will slow the start-up of some of these projects.

Aramco has been developing two major non-associated gas projects over the past five years. As well as the Wasit scheme, the Karan offshore field is being developed and will be its first non-associated gas field to come on stream providing 1.8 billion cf/d of dry raw gas by 2013.

The state-owned oil firm expects to provide the kingdom with 13 billion cf/d by 2020 with the gas from the Arabiyah and Hasbah fields, making up a large percentage of the additional volume. In 2012, Aramco produced 9.4 billion cf/d and has proved reserves of 279 trillion cubic feet, the fourth largest in the world.

Saudi Aramco and Saipem were not available for comment when contacted by MEED.

 

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