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Intense bidding seen for PetroRabigh expansion

Al Khobar, June 9, 2011

Saudi-based contractors expect fierce competition in bidding for the expansion of PetroRabigh petrochemical complex as firms strive for more work in the world's largest oil exporter.

Bidding on seven packages as part of the expansion for the complex, jointly owned by Saudi Aramco and Japan's Sumitomo Chemical, is due to close on Oct. 1, said sources close to the bidding process. Another three packages have not yet been issued.

PetroRabigh, in Rabigh on the Red Sea coast of Saudi Arabia, now has an annual output of 18 million tonnes of refined products and 2.4 million tonnes of petrochemicals.

The award of the new deals is expected early next year while the project -- Rabigh II -- is due to be completed in the first quarter of 2015, sources said.

As part of the expansion, estimated to cost between $6 billion and $8 billion, partners would look to increase the capacity of the existing ethane cracker to take in an additional 30 million cubic feet per day of feedstock ethane.

The venture would build a number of other petrochemicals plants including an aromatics complex using around 3 million tonnes per year of naphtha as feedstock.

'This time everybody is there, all are there,' said one source, referring to the bidders. 'There is no doubt the process is going to be very tough, but everybody is committed, we are going to fight for it,' the source added.

'This is the year of petrochemicals investments, everybody was waiting,' he said. Bidding has already started for another petrochemical complex in Jubail, on the Gulf coast shared by Aramco and US Dow Chemical.

Rabigh II and the new complex with Dow are set to almost double Aramco's chemicals manufacturing capacity and would add a number of products new in the Middle East.

Prices versus know-how

South Korean companies have been competitive in bidding for projects across the Gulf region.

Aramco has awarded 39 contracts to South Korean companies worth $11.5 billion in the last five years, Aramco's chief executive, Khalid Al-Falih, said recently.

'They are not simple contracts, the Aramco JV will have to look at the know-how, they will surely take consideration of the price...and there's an incredible response from the market,' the source said.'

Earlier this year, the much-awaited two gas projects in Saudi Arabia, Shaybah Natural Gas Liquids (NGL) and Wasit, which will be the kingdom's largest gas plant, have been awarded to South Korean companies with the exception of one package related to Wasit, which Italy's Saipem won.

Some contractors said Shaybah and Wasit being awarded to South Korean companies have spooked other participants in the market. 'Competition was harsh in Shaybah and Wasit, prices we believe were less than the cost,' said a second source.

'This (PetroRabigh) will be really tough competition even for Koreans, most of them have huge workload,' said third source said.

Others said the project could be split between South Korean and Japanese firms. 'This one is a Japanese playground,' a fourth source said.

Although the South Koreans were likely to keep their price advantage. 'When you consider the price level, when you compare the Japanese prices with their (South Koreans) prices, there's a huge gap which Japanese cannot recover,' another source said.

'Japanese are eager to get some new contracts, European companies too,' said the source.

A total of 68 companies were invited to bid for the expansion. – Reuters




Tags: Saudi | petrochemical | Expansion | PetroRabigh | Al Khobar | Bidding |

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