Fears mount among contractors after Chinese bid $100m under budget
China Petroleum & Chemical Corporation (Sinopec) has won a $140m deal to build a new bulk oil distribution plant at Wasea for state energy giant Saudi Aramco, according to contractors who bid on the deal.
The Chinese state refiner submitted the lowest bid of $141m for the engineering, procurement and construction (EPC) contract during a December bid round, according to the local partner of one of the bidding firms.
It beat the next best price of $158m submitted by Japan’s JGC Corporation and was almost $100m lower than Aramco’s budget of $240m, according to the business development manager of another bidding firm.
Sinopec was formally awarded the contract on 20 January, according to sources close to the deal.
Under the contract, the company will build tanks, petrol and diesel-loading pumps, as well as substations, and carry out civil engineering and structural work for the bulk plant. The plant will be used to collect and distribute oil and gas at Wasea, south of Riyadh.
The plant will handle an increase in petrol, diesel and fuel oil supplies to the region and will have capacity to handle 185,000 barrels a day of oil.
Sinopec’s low bid has increased fears among more established contractors about the impact of a new wave of low-cost rivals entering the region, that are willing to bid even lower than South Korean firms which have until now tended to be the lowest-cost operators.
“They bid even lower than [the traditional low-cost contractors] the South Koreans,” says the local partner. “Their bid was very, very low, so that no-one else could come close. I hope they do not bid like this on the bigger Aramco projects that are coming up.”
Sinopec has until 29 February 2012 to build the plant.