Region tables $100 billion in petrochem projects
By Xavier Bastier
of Sentinel Middle East
NEVER BEFORE has the entire globe been so affected by news events as in 2005. With natural disasters and political uncertainties aggravating trading conditions, the world saw record oil prices during the second quarter of 2005.
Consumers lay some of the blame on the doorstep of the oil cartel that did not respond quickly enough to counter the effects of the multiple disasters in the Gulf of Mexico almost bringing a halt to all production.
Cartel members shift the blame to global refining volume limitations.
Nevertheless, everyone agrees that high oil prices are here to stay. But no-one seems to be clear as to what price oil will be traded at in the future.
Saying that producers are using conservative numbers for budgets is an understatement. Most agree that the mid-$20’s range used for budgeting purposes by the major national oil producers in the Middle East will not be seen for a long time.
With current budgets the way they are, expect to see vast surpluses for all of the major producers. How these surpluses will be dispersed will be a challenge in itself.
With annual capital expenditure set to more than double over the next three years - exceeding $60 billion a year in 2007 - and forecast even higher for the years thereafter, oil majors are seen in a race to develop as much as possible production capacity along with the downstream sector while they can capitalise on favourable oil prices.
Not only are new fields being developed but older fields revamped or re-commissioned applying the latest technologies to increase recovery efficiencies and subsequently increase profitability.
With the exception of a few, most of the national oil companies have made significant new discoveries during the year to either maintain or even increase their proven reserves.
With an emphasis on refining capacity, all the GCC countries announced new refinery projects or capacity expansion projects during 2005. Saudi Arabia is leading the way with major refinery projects at Jubail, Rabigh, Ras Tanura and Yanbu.
Kuwait is feverously working on a number of refinery upgrade projects including a new fourth refinery at Al Zour. Qatar also announced plans for a new 200,000 barrel per day refinery at Mesaieed, to be called the Al Shaheen refinery.
Not only are GCC countries investing in refining capacity, but also in the downstream petrochemical sector.
With Asian demand for downstream chemicals rising to record levels, ever increasing environmental regulations in traditional manufacturing countries, the cost and availability of raw materials and labour costs, more and more companies are looking to the Middle East for a solution.
Forecasts indicate that annual capital expenditure on petrochemical projects will exceed $25 billion by 2007, overtaking annual spending on the oil and gas sectors. There are currently more than $100 billion worth of petrochemical projects on the table with more than half in Saudi Arabia.
There are more than $5 billion worth of projects in the gas industry of which $40 billion will be spent over the next three years with the bulk of the projects being new LNG trains in Qatar.
Such are the size of these LNG projects that Qatar was leading the GCC countries on capital expenditure during 2005 followed closely by the Saudi Arabia and the United Arab Emirates.
During 2005, the total value of major projects awarded exceeded $60 billion led by Saudi Arabia with projects totalling more than $25 billion followed by Qatar with more than $15 billion, Kuwait and the UAE with $9 billion and $8 billion respectively.
Bahrain started construction work on the Bapco refinery expansion and the Banagas LPG storage units with a combined budget exceeding $200 million.
Kuwait invested heavily on upgrading its ageing upstream infrastructure with KOC awarding upgrading and improvement projects with a combined budget exceeding $4.5 billion. The largest contract was awarded to the Petrofac SKEC venture to upgrade flow lines and facilities with a budget of more than $1.9 billion. Petrochemical projects also pressed ahead with contracts on the KARO Aromatics complex and The Kuwait Olefins Company’s Olefins II complex to the value of $2.3 billion.
In Oman, Petroleum Development Oman awarded the $1 billion Harweel Enhanced Oil Recovery Project Phases 2a and b to the Petrofac Galfar venture. The contracting team also won the $260 million Al Kawther Gas Gathering Centre and Processing Facilities contract with PDO also the client. An award is expected early in 2006 for the $150 million major pipeline package.
The gas industry is leading construction spending in Qatar. Rasgas awarded the EPC contracts on the trains 6 and 7 on and offshore packages to the Chiyoda Technip venture (onshore) and Jay Ray McDermott (offshore).
Pearl GTL, the gas-to-liquids plant developed by Shell, has awarded the main gas processing package with a budget in excess of $2 billion on the massive integrated scheme to the KBR JGC venture. Awards are expected early in 2006 on most of the remaining packages including the offshore platforms and pipelines.
Other major awards include the new helium plant and condensate refinery in Ras Laffan, offshore platforms and topsides for Qatargas and Rasgas exceeding $1 billion and a new sulphur handling facility in Ras Laffan.
In the petrochemical sector, more than $3 billion worth of projects were awarded. Most notable are the Q-Chem II development with a new ethane cracker and ethylene derivative plants. Qatofin awarded Snamprogetti the EPC contract on its $650 million LLDPE plant in Mesaieed.
Saudi Arabia has led the Middle East in the value of projects awarded during 2005. The largest package award was made to the Technip Bechtel venture for the $1.8 billion ethane and NGL recovery plant on the AFK Oil Field Development scheme.
Snamprogetti was awarded the $ 1 billion Gas-Oil Separation Plant on the same scheme.
Petro-Rabigh, the joint venture company between Saudi Aramco and Sumitomo, awarded projects exceeding $4.5 billion on its Rabigh Integrated Petrochemical Complex. The refinery upgrade and ethylene derivative plants, valued at $1 billion each, were the largest of the eight packages awarded leaving only the ethylene glycol and propylene oxide units still under bidding.
Saudi Arabia has significantly adapted its focus with an extremely large investment drive in petrochemical plants with commitments for 2005 exceeding $15 billion.
Sabic, Tasnee and Sharq awarded similar sized contracts for new crackers at their respective facilities along with ethane and propane derivative plants.
In the Divided Zone, Al-Khafji Joint Operations awarded projects exceeding $400 million on new offshore and onshore developments with more projects under bidding.
In the United Arab Emirates, gas related projects exceeding $4 billion were awarded with the largest being the $1.4 billion third NGL train at Ruwais which includes the fractionation plant and export facilities, all part of the OGD 3 and AGD 2 development.
Emirates National Oil Company has awarded the EPC contract on its $500 million Jebel Ali Refinery expansion project to Foster Wheeler. |
