As the Gulf looks to ramp up downstream efforts to boost petrochemical product exports, South Korean companies are making in-roads with contracts for the construction of Oman’s upcoming refinery.
The sultanate, like other oil producers, wants to diversify its economy with a larger downstream sector; construction work on a new refinery in Duqm is scheduled to start soon, on the heels of three “intent to award” contracts totaling approximately $7 biillion (Dh26bn), with South Korean firms featuring prominently.
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The Duqm refinery will focus on producing naphtha, jet fuel, diesel and liquefied petroleum gas. The new facility will significantly boost Oman’s refining capacity to allow it to beef up its oil products exports, said Muhamad Fadhil, head of Middle East markets at ICIS, a petrochemical market firm.
“With regional crude and petrochemical production centred around Saudi Arabia, Oman recognises the need to be more competitive to support domestic downstream sectors and at the same time diversify its economy,” he said.
The Duqm refinery, part of a US$15bn investment to develop the Duqm Special Economic Zone in the south of the country, will have three engineering, procurement and contracting (EPC) awards to help start commercial operations in 2021.
An intent to award means that these companies have been approved to receive the award, but the bidder is sent an agreement with other documents before Duqm determines that all required submissions have met standards.
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Spain’s Tecnicas Reunidas and Daewoo Engineering and Construction of South Korea was selected to carry out the process units project. The company said on Monday that this was the largest of the three packages for the refinery since it included all the process units, valued at $2.75bn.
The next $2bn intent to award went to Samsung Engineering and its partner, London-listed Petrofac, marking the South Korean company’s first step into Oman. The pair will be in charge of the utilities and offsites package.
Samsung said that it expected to “gain a promising spot in the potential petrochemical project market, which is expected to receive orders next to oil refining”. Oman had been the only country that Samsung had been missing throughout the GCC.
Choong Heum Park, president and chief executive of Samsung, said that the company had already completed a number of similar projects. “We will be able to successfully complete this project and further strengthen our market presence in the GCC, including Oman,” he said.
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The final award, valued at around $2bn, is expected to go to a consortium made up of Italy’s Saipem, JGC of Japan and South Korea’s GS Engineering & Construction, for the refinery's export terminal including storage tanks, according to a source close to the matter.
In addition to Duqm, the sultanate is also looking to increase its petrochemical production with the Liwa Plastics Industries complex from Oman Oil Refineries and Petroleum Industries Company, in line with other Gulf countries looking to increase downstream supplies.
“The Middle East continues to bolster its refining capacity to cater to its export markets, notwithstanding concerns about oversupply amid the shale oil and gas production boom in the United States,” Mr Fadhil said.
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