US-based engineering giant McDermott International has won three prized offshore contracts from Saudi Aramco as a part of Saudi Arabia’s coveted long term agreement (LTA) with leading global offshore contractors.
McDermott said in a statement on Tuesday that it has been awarded three new awards from Aramco for engineering, procurement, construction and installation (EPCI) projects.
“In total, McDermott will provide EPCI of four drilling jackets and seven oil production deck modules (PDMs) in Saudi Arabia's Zuluf, Ribyan, Abu Sa'fah and Safaniya fields located offshore in the Arabian Gulf,” the US-based contractor said.
In addition to the seven PDMs and four drilling jackets, the project’s scope of work for the three— contract release purchase orders (CRPOs) includes the EPCI of more than 45 kilometres of offshore pipelines and 100 kilometres plus of subsea cables and tie-in works to existing facilities, it added.
“Fabrication is expected to begin in the first quarter of 2022, with offshore installation commencing the fourth quarter of 2022 and overall completion expected the second quarter of 2023,” Mcdermott noted.
Upstream had recently tipped Mcdermott as the frontrunner for the three CRPOS’s, as a part of the kingdom’s coveted LTA arrangement.
While McDermott did not reveal the value of the 3 LTA deals, Upstream understands that the projects are together worth upwards of $500 million.
Three CRPO deals
The offshore projects awarded to McDermott include Aramco’s contract release purchase orders (CRPOs) 73, 74 and 84, project watchers said.
McDermott last year successfully emerged from bankruptcy, after a US court approved its reorganisation plan and the sale of the company's Lummus technology unit, months after filing for bankruptcy protection.
Since then, the company’s position took a major hit in the Middle East region with key state-owned companies like Aramco and Qatar Petroleum taking a cautious approach on the award of sizeable EPC projects to the company, due to an amply publicised financial restructuring, completed in 2020.
However, the situation now appears to be working in favour of the US contractor with the three Saudi CRPO's awards.
The new Aramco deals are McDermott’s first sizeable offshore EPCIc contract awards in Saudi Arabia following its Chapter 11 move.
The US player is also said to be competing in several offshore tenders being carried out by other Middle Eastern state-owned giants that include Qatar Petroleum and Abu Dhabi National Oil Company (Adnoc), Upstream understands.
McDermott is a key part of Aramco’s prestigious LTA arrangement that includes 10 leading international contractors or consortiums.
The LTA contractors are responsible for all of the country’s brownfield and offshore maintenance work on leading offshore oilfields.
Aramco has been spending between $1.5 billion and $2 billion each year on offshore brownfield and maintenance projects as a part of its LTA agreement, but expenditure nosedived last year in the wake of Covid-19 crisis.
However, LTA spending this year is expected to improve on the back of higher crude prices and improved market fundamentals, as Upstream understands from communications with several people following Aramco's planning closely.
Multiple offshore LTA EPC contracts are said to currently be in the tendering stage, with the majority of jobs likely to be finalised later this year.
Several giant oil and gas fields in Saudi Arabia have been producing for years and require multiple stages of brownfield investments to maintain their production profile.
Up to 10 leading international contractors or consortia that are a part of Aramco’s coveted LTA arrangement are participating in numerous brownfield jobs being offered by Saudi Arabia.
These include Malaysia’s Sapura, China’s Offshore Oil Engineering Company (COOEC), a pairing of Lamprell and Dutch player Boskalis, a grouping of UK-based TechnipFMC and Malaysia Marine & Heavy Engineering, McDermott International and Dynamic Industries of the US, Italy’s Saipem, a partnership of India’s Larsen & Toubro Hydrocarbon Engineering with Oslo-listed Subsea 7, NPCC and South Korean giant Hyundai Heavy Industries.