Uptick in GCC gas awards expected in 2014

12 February 2014

Oman’s Khazzan deal the first of several big contracts this year as GCC invests in gas supply

Engineering, procurement and construction (EPC) awards in the GCC gas sector could reach a three-year high this year as Oman, Kuwait, Saudi Arabia and the UAE prepare to start construction of significant projects.

The past two years have been relatively slow for gas contracts in the six-state bloc, according to regional projects tracker MEED Projects. Energy companies in the region awarded $3.96bn in EPC contracts last year and just $2.24bn in 2012 following a recent high of $12.61bn in 2011.

As much as $15bn-worth of gas EPC contracts could be awarded in the GCC this year, estimated from the budget of projects in the pre-construction stage.

With the exception of Qatar, which has an overabundance of reserves and production, the need to increase gas capacity has become much more acute in the GCC over the past decade.

Rapid industrialisation and population growth across the region has put increasing strains on the ability for governments to keep up with rising gas consumption.

This is exemplified by the trend for governments to target more expensive unconventional and high-sulphur fields, including sour gas in the UAE, shale gas in Saudi Arabia and tight gas in Oman and Jordan.

The increased technical challenges of developing these resources will provide big opportunities for engineering contractors in the region with national energy companies prepared to pay more than a decade ago to develop the same level of new capacity.

With Abu Dhabi closing in on the completion of the region’s first major sour gas project at the onshore sour field, the next major unconventional project to go into the construction phase is BP’s Khazzan tight gas field in Oman. The UK energy group has just awarded the first major gas award of 2014 with a $1.4bn deal for Khazzan’s central processing facility.

Several more major EPC packages are expected to be awarded on the $16bn megaproject throughout the rest of 2014, with the development due to come on stream in 2017.

In Saudi Arabia, state oil and gas group Saudi Aramco is expected to award a major EPC contract on the Fadhili gas plant in the Eastern Province. The facility will have a huge processing capacity of 1.5 billion cubic feet a day (cf/d) sourcing unassociated gas, making it 50 per cent larger than the Khazzan gas plant in Oman.

Elsewhere, Abu Dhabi Gas Industries (Gasco) is prequalifying companies to bid on the expansion of its Integrated Gas Development (IGD). The original IGD, which came on stream last year, increased the flow of gas from Abu Dhabi’s offshore gas fields to its onshore processing hub in Habshan.

Increasing gas demand has also led to the need for liquefied natural gas (LNG) import terminals, which should be awarded in the coming years in the UAE, Kuwait and Saudi Arabia.

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