Petrofac ... winning projects

Petrofac ... winning projects

EPC contractors adapt to change

EPC contractors are shifting to adapt to an environment that requires them to be more ambitious, and more versatile, while maintaining financial discipline

As the oil and gas sector has seen some drastic changes in the past year, so too has the engineering, procurement and construction (EPC) sector. While the region’s national oil companies moved to integrate vertically and boost their downstream portfolios, so, too have EPC contractors.

EPC contractors are shifting to adapt to an environment that requires them to be more ambitious, and more versatile, while maintaining financial discipline to suit the changing needs of the region’s oil and gas companies.

Some of the region’s major deals this year have been in the downstream segment, but upstream has seen an incredible amount of traction as well, with giants like Saudi Aramco looking to invest billions of dollars into redeveloping ageing assets. Its Long-Term Agreement programme has kept some EPC companies busy and their project pipelines full.

Among the top EPC contractors was India’s Larsen & Toubro thanks to some major wins and a growing presence in the Middle East. L&T Hydrocarbon Engineering (LTHE), the energy arm of L&T, won contracts with Arab oil companies and demonstrated a strong interest in partnership within the region.

LTHE is part of Saudi Aramco’s Long-Term Agreement (LTA) programme, which was created to support the oil giant’s offshore projects and cut down lead time for contractors within the LTA. In consortium with Subsea 7, LTHE has so far won five contracts from the Saudi oil major. In January 2019, the consortium secured an EPCI contract from Saudi Aramco for the Zuluf and Berri fields. It includes EPCI work on three oil production deck manifolds and subsea pipelines.

In February 2018, it won a $316 million contract from Al Dhafra Petroleum, the joint venture between Adnoc and Korea National Oil Company and GS Energy. The scope of work include engineering, procurement, construction and commissioning of flow lines, gathering facilities and pipelines to transfer crude oil and gas from Haliba fields to Asab’s processing facilities. In Kuwait, LTHE in April 2019 won a pipeline construction contract from Kuwait Oil Company, valued between $360 million and $720 million. Further downstream, it won an EPC contract for a $450 million coke calciner project in Sohar, Oman. Across the value chain and the GCC, LTHE has been difficult to miss in the past year.

However, it is not simply the scope or volume of work that matters; L&T has also created L&T-Nxt, an initiative to boost its digital expertise and gain insight into the internet of things, artificial intelligence and augmented reality.

Another topper, Petrofac was awarded a $1 billion EPC contract with Groupment Isarene, a joint operating group set up by Sonatrach, Petroceltic and Enel, for the Ain Tsila Development Project in Algeria. Located around 1,100 kilometres south-east of Algiers, the Ain Tsila field will produce gas, LPG and condensate for the local Algerian market and for export. The company also won a $115 million contract for Qarn Alam Co-Generation Projects, the latest in a series of awards for Petrofac in Oman under its 10-year framework agreement with Petroleum Development Oman. In Oman, Petrofac also hosts a training programme for graduate engineers to boost in-country value and prepare locals talent to join the workforce.

McDermott has also made significant inroads despite posting a $2.7 billion net loss for 2018 due to a $2.2 billion goodwill impairment charge. After completing its acquisition of CB&I, valued at around $6 billion, the company has seen increased activity across the value chain, including a petrochemicals contract in Kuwait, two EPCI contracts for Saudi Aramco’s offshore Marjan field, a contract for Feed services from Adnoc Refining, among others. It signed an agreement with Saudi Aramco to establish an EPCI facility in Saudi Arabia for large scale fabrication of offshore platforms and onshore/offshore modules, in line with localisation initiatives. With $6.7 billion in new contracts as of Q1 2019, McDermott appears poised to jump back in the black.

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