US-based engineering giant McDermott International is in pole position to secure three prestigious offshore contracts from Saudi Aramco as a part of Saudi Arabia’s coveted long term agreement (LTA) with leading global offshore contractors.
At least three people familiar with the development told Upstream that McDermott is well-positioned to win three prized LTA deals from Aramco that are together worth upwards of $500 million.
The offshore projects that are likely to be awarded to McDermott include Aramco’s contract release purchase orders (CRPOs) 73, 74 and 84, and include multiple offshore fields in the kingdom, one person said.
However, a formal announcement is yet to be made by Aramco, he 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.
Better times
However, the situation now appears to be working in favour of the US contractor with the three Saudi CRPO's likely to be awarded in due course, a second person said.
“Once confirmed, this will be McDermott’s first sizeable offshore contract award by Aramco following its Chapter 11 move,” he added.
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.
In response to an Upstream query, a Mcdermott spokesperson said that the company does not comment on market rumours, while Aramco did not respond to a query seeking response on the three offshore projects.
Brownfield spending
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.
Four jackets
The workscope for CRPO 73 involves the engineering, procurement and construction of four offshore drilling jackets destined for the Zuluf, Abu Safah and Ribyan offshore fields.
CRPO 74 comprises the EPC of at least three oil production deck modules destined for the Safaniyah and Abu Safah fields. In addition, the preferred contractor will be responsible for laying flexible subsea pipelines, one informed source said.
CRPO 84, involves the EPC of up to four oil production deck modules destined for the Zuluf and Ribyan fields, a second person said.
LTA list
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.
LTA players are increasingly taking a more selective approach to LTA contract bids, based on their execution strategy.
