South Pars prices spur awards confusion

19 November 2004
Four commercial bids were opened on 13 November for the upstream development project for South Pars phases 15-16. However, sources close to the project say it will take at least another month to standardise the prices according to the different technical ratings scored by each bidder. The size of the project - in the range of $1,000 million-1,500 million - has raised concerns that an award will be influenced by political considerations (MEED 27:8:04).

According to the bid opening prices, a team of Ghorb Khatem, an engineering subsidiary of the Islamic Revolutionary Guards Corps (IRGC), with Iran Marine Industries Company (Sadra)is the low bidder. However, the company scored lower than the three other bidders technically and has not carried out a project of this magnitude before.

The three other bidders are: Hyundai Engineering & Constructionand LG Engineering & Construction, both of South Korea, with the UK's Foster Wheeler Energyand the local Iran Shipbuilding & Offshore Industries Company (Isoico); Chiyoda Corporationof Japan, with Daelim Industrial Groupof South Korea and Industrial Development & Renovation Organisation (IDRO)and Petropars, both local; and Paris-based Technip, with Oil Industries & Engineering Company (OIEC)and Saaf Offshore, both local.

The project will produce 50 million cubic metres a day of treated gas for domestic use, 1 million tonnes a year (t/y) of liquefied petroleum gas (LPG) for export, 80,000 barrels a day of condensates, also for export, and 1 million t/y of ethane for use in local petrochemical projects. Sulphur recovery on the phases will run to 800 tonnes a day for export, twice the level of previous South Pars projects.

The client, Pars Oil & Gas Company (POGC), has said in the past that it also wants to go into direct negotiations with the second-ranked bidder on the project for the next major development of South Pars - phases 17-18. However, project sources say it is unclear if this intention remains.

National Iranian Oil Company (NIOC)head of planning Akbar Torkan said in a mid-November interview that final approval for the project would have to be made at the political level. Contractors have expressed concern in recent months that the political climate does not favour the award of major projects to foreign companies.

The Majlis (parliament) has recently targeted two major development projects awarded to Turkish companies, stating that local companies were capable of carrying them both out (see Economy, page 25). Awards have also slowed due to preparation for presidential elections scheduled to take place next summer. There are fears that the change in administration will lead to a re-examination of large contracts awarded by the current regime.

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