x Abu Dhabi, UAESunday 23 July 2017

Contracts awarded for Saudi oil refinery construction

Saudi Aramco and France's Total have awarded contracts to build a new oil refinery on the Saudi Gulf coast after months of delay.

Saudi Aramco and France's Total have awarded contracts to build a new oil refinery on the Saudi Gulf coast after months of delay. The companies awarded 13 engineering, procurement and construction contracts for the 400,000 barrel per day (bpd) Jubail refinery, worth US$9.6 billion (Dh35.23bn) in total, with the biggest going to Spain's Tecnicas Reunidas and France's Technip, the Saudi news agency SPA reported.

The awards were delayed because Aramco and Total wanted contractors to lower their bids to reflect falling construction costs. The winning offers were 20 per cent lower than the original $12bn cost estimate for the project, enabling the joint-venture partners to save $2.4bn. The Jubail refinery should now process its first oil in March 2013, instead of Dec 2012, and should be fully operational by the second half of 2013.

"The cost to us of delaying the project by a week is much less than the savings we get if we spend the time convincing contractors that their price isn't right," Michel Benezit, the president of refining and marketing at Total, said in May after the French energy group set a $10bn price cap on the project. Competition for the Jubail contracts intensified as other refinery projects around the world were delayed or cancelled as the recession squeezed profit margins for processing crude. But with costs coming down, Riyadh is now proceeding with several refining and petrochemicals projects it had previously put on hold.

Last week, Aramco and the US-based ConocoPhillips restarted bidding for a 400,000 bpd refinery project at Yanbu, on the kingdom's Red Sea coast. The state-owned Aramco also revived a US$22bn joint venture with Dow Chemical, the US chemicals maker, involving a 400,000 bpd expansion of Saudi Arabia's Ras Tanura refinery to be integrated with a major petrochemicals development. The three projects are among five proposed to raise Saudi Arabia's refining capacity to 3.8 million bpd from 2.1 million bpd to meet the kingdom's rising domestic demand for petroleum products and to raise export revenues by shipping processed oil in place of some crude.

tcarlisle@thenational.ae