Shah gas partners delay decision over bidders

03 February 2010

Concerns grow over relationship between Adnoc and ConocoPhillips

The companies behind the $10bn Shah gas development have told firms bidding for two key management deals that they need more time before making a decision.

The delay is the latest in a series of setbacks for the project and comes amid mounting concern over the relationship between Abu Dhabi National Oil Company (Adnoc) and the US’ ConocoPhillips, which are developing the scheme.

Sources close to the firms that bid on the two project management consultancy (PMC) contracts say Abu Dhabi Gas Industries (Gasco), the Adnoc subsidiary tendering the contracts, approached them in late January to extend the validity of their bids until the end of March.

The deals cover engineering, procurement and construction work to produce, process and distribute sour gas from the Shah field, 80 kilometres south of Abu Dhabi.

The US/Canadian Veco along with Bechtel and Fluor, both of the US, submitted bids for the deals on 12 January and had expected contracts to be awarded in early February.

“They have extended the bid validity until the end of March and have asked bidders to have their bid bonds extended until then as well,” says a senior executive close to the process. “To me that says that they won’t award a deal until then. Apart from that they have told us absolutely nothing about what is going on.”

The project has already suffered delays in the past. In early January ConocoPhillips and Adnoc delayed the deadlines for construction deals on the scheme until late March, as they reviewed the overall design of the project (MEED 12:1:10).

The companies want to produce 1 billion cubic feet a day of sour gas at the Shah field, before separating the sulphur from the natural gas and transporting both to Habshan and Ruwais.

They originally planned to use a pipeline to transport the sulphur but the local Union Railway Company was asked in October to look at the feasibility of building a 264km railway line instead, which would be used to transport granulated sulphur.

There are also now signs of problems within the Adnoc-ConocoPhillips consortium, according to a number of sources close to the project.

“The Adnoc and the ConocoPhillips people aren’t getting on at all and it is causing a lot of problems in terms of communication,” says one executive who has been in close contact with the US firm.

A second executive who works closely with Adnoc confirms that relations are strained between the management teams working in the joint venture, and says that a series of talks were held in late December in an attempt to heal the rift.

“If they can’t work this out, then they may have to consider splitting the partnership,” says a senior manager at another company which works with Gasco.

Senior executives from ConocoPhillips and Adnoc declined to comment on the future of the joint venture.

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