A $426m deal: inside Kuwait’s Jurassic gas contracts

Kuwait-based contractor Spetco and China’s Jereh have been awarded main contracts to build Kuwait Oil Company’s (KOC) Jurassic production facilities (JPF). The projects are known as JPF-4 and JPF-5, and the deal for the latter is valued at $426m, making it the biggest oil and gas contract Jereh has won since it was established in 1999, according to a statement released by the company.

In its statement, Jereh said that it started the prequalification for the project in early 2018 and ‘organised clarification exchanges with KOC’ more than a hundred times as part of the tendering process.

It added: “In the bidding stage, after two rounds of quotations, Jereh Oil & Gas Engineering finally stood out from the fierce competition of the five companies participating in the bidding and successfully won the bid at a non-lowest price.”

The JPF-5 project has been divided into two phases, according to Jereh. These include a 26-month engineering, procurement, construction and commissioning period and a 60-month operation and maintenance service period.

Li Weibin, vice-president of Jereh, said: “This cooperation with KOC is the first breakthrough of Jereh’s integrated surface engineering solution for oil and gas fields in the Kuwait market. It is another great feat of Jereh’s internationalisation strategy in the Middle East. KOC is a leading international high-end oil company.

“The implementation of this project will effectively enhance Jereh’s brand influence in Kuwait and the entire Middle East and North Africa market, laying a solid foundation for the company to further expand”.

In October, MEED revealed that Spetco and Jereh had submitted the two lowest bids in the second round of bidding for JPF-4 and JPF-5. Spetco submitted a low bid of $398.2m for JPF-4, and Jereh submitted a low bid of $426m for JPF-5 with its local partner Napco.

The facility known as JPF-4 is due to be located close to the Sabriyah field in the north of Kuwait, and JPF-5 will be less than 10km to the east of JPF-4.

Both facilities will conduct testing, processing, treating and handling of wet and sour hydrocarbon well fluids from several oil and gas fields. These include Raudhatain, Sabriyah, Northwest Raudhatain, Umm-Niqa, Dhabi, Bahra and the fields of Marrat and Najmah-Sarjelu and other formations in the Jurassic fields.

Both projects are onshore surface production facilities and will be implemented on a build-own-operate basis by a contractor, with an option for KOC to buy them back at a future date. The facilities are due to be built with the capacity to produce 50,000 barrels a day  of treated sweet crude and 150 million standard cubic feet a day of sweet and dehydrated rich gas.

They will include a produced-water treatment unit, a sulphur recovery unit and associated utilities and supporting systems.

Bids were submitted by four companies on 6 October, according to industry sources, including Kuwait’s NBTC and Saudi Arabia’s Al-Khorayef Group, who both bid greater sums for both projects than Spetco and Jereh.

The Kuwaiti contractor Gofesco, which participated in the first round of bidding, did not get a bid bond and did not submit a bid in the second round.

Yet the bidding is not yet complete, with work at the execution stage for services at each facility still unawarded. Bidders have been told that this stage will consist of 780 calendar days, which includes 720 days for the design and engineering, project management, supply and procurement, construction, testing and mechanical completion of each facility.

Under the terms of the contracts, commissioning, stabilisation and successful performance testing of the facility should be completed within 60 calendar days of the mechanical completion of the facility. The winners of the contracts will then operate and maintain the facilities for five years.

This article first appeared in MEED.