KHOBAR, Saudi Arabia,(Reuters) – State oil giant Saudi Aramco plans to award deals to build a 400,000 barrels per day (bpd) oil refinery in Yanbu in the coming few days, industry sources said on Wednesday.
Yanbu accounts for just under a quarter of Saudi plans to add around 1.7 million bpd of refining capacity to the current 2.1 million bpd.
Aramco has said it will push on with the project on the Red Sea coast even after U.S. firm ConocoPhillips withdrew in April.
The partners had already tendered for the construction packages when Conoco pulled out, and planning had reached an advanced stage. Bidders for the deals had expected contracts would be awarded in May.
“We expect early next week,” one source said when asked about the date of the contracts’ award. “They (Aramco) do not want to lose all these rates, they got good offers.”
Long before parting company on the project, Conoco and Aramco had forced contractors to go back to the drawing board to submit revised bids in January to take into account lower costs of raw materials after the global economic slowdown.
Saudi Oil Minister Ali al-Naimi said the profit margins for the project had risen with the new bids.
The two firms had pencilled in South Korea’s SK Engineering to build a crude unit, Daelim Industrial for a gasoline unit, and GS Engineering to build a hydrocracker.
Daelim was one of the most aggressive bidders for several packages, and may also win the hydrocracker contract, replacing GS, a source told Reuters on Wednesday.
Spain’s Tecnicas Reunidas would build a coking unit. India’s Punj Lloyd would build some offsite infrastructure and pipelines while Egypt’s ENPPI would build a tank farm.
After Conoco’s withdrawal, Aramco asked engineering firms to extend the validity by 60 days of bids they submitted in January.
The cost of the refinery doubled to around $12 billion in 2008 from $6 billion when Aramco and Conoco first announced the project in 2006.
The price tag has since fallen and industry sources said economics were better than for the sister Jubail refinery, in which Aramco teamed up with France’s Total.
Bidding for a solids handling unit has still not closed. It has been extended to July 6.
Both Yanbu and Jubail would process heavy crude from Saudi Arabia’s 900,000 bpd Moneefa oilfield.
Many companies had expressed interest in replacing Conoco as the partner in the plant, and among them were Asian bidders, Naimi said earlier this month.
But Aramco has yet to select a new partner for the plant, sources said.
“So far they haven’t selected a partner…they will go ahead with the project,” said a source.
UAE GAS PROJECT
Conoco also pulled out from a $10 billion gas project in neighbouring oil producer, the United Arab Emirates, as the U.S. firm looked to focus investment on oil and gas exploration and production and away from refining.
State-run Abu Dhabi National Oil Company (ADNOC) which is developing the project awarded engineering, procurement and construction (EPC) contracts days after the U.S. firm’s withdrawal as it secured competitive and attractive bids.
Like Aramco, ADNOC has said it would move ahead with the project. Industry sources said last week ADNOC wants Royal Dutch Shell to step in as its partner.
Aramco may follow suit and select a partner after the construction deals are signed, one source said.
“It is another possibility,” said the source.