Shah gas field developers put construction contract on hold

08 December 2009

Joint-venture halts bidding on deal to build sulphur-handling facilities

The joint venture behind the $10bn-plus Shah gas project in Abu Dhabi has suspended bidding on a key construction contract to give it more time to consider the design of the scheme.

The wider Shah project is to develop the emirate’s southern Shah field and transport the gas for export to the Gulf coast.

The delayed project covers construction of sulphur-handling facilities at the export terminal at Ruwais.

Details of the delay have only just come to light, but the joint venture, comprising Abu Dhabi National Oil Company (Adnoc) and the US’ ConocoPhillips, told contractors in early December that they had stopped the bidding.

The joint venture had set a deadline of 6 December for technical bids for the engineering, procurement and construction deal.

“There will be a meeting in January 2010 at which they will explain the new scope of the project, but it could be March before the bidding starts again,” says the business development manager of one firm that intended to bid for the job.

Adnoc and ConocoPhillips plan to produce 1 billion cubic feet a day of natural gas from the ‘sour’ – sulphur-rich – reserves of the Shah field by 2014.

The pair plan to separate the sulphur from the gas and transport 7 million tonnes a year of the chemical to processing and export facilities at Habshan and Ruwais, where it will be processed.

This is the second key construction contract to be suspended on the wider Shah project. In June, the partners cancelled the tender for a contract to build a pipeline to transport the gas after the work failed to attract enough contractors to stage a competitive bid.

Adnoc and ConocoPhillips have yet to decide how to transport the sulphur to the coast.

In December, they commissioned the US’ Fluor Corporation and the local Union Railway Company to carry out competing front-end engineering and design studies for a 264-kilometre-long pipeline and for a 275km railway.

Meanwhile, executives at firms bidding on the two other construction deals on the Shah scheme say that they are pushing Adnoc for more time to prepare commercial bids. The deadlines for the two $1bn-plus construction deals are in the second half of December and in January.

“There is a lot of concern that people are not being given enough time to prepare bids,” says a senior executive at one firm planning to bid.

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