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May 15, 2020

Aramco asks onshore LTA bidders for revised rates

By MEED   

Saudi Aramco has asked contractors bidding to be part of its proposed group of Long-Term Agreement (LTA) contractors for onshore projects to revise their bid rates, according to sources.

Bidders have ‘until end of next week’ to submit revised offers, one source said, implying the submission deadline is 21 May.

Gulf national oil companies (NOCs) have been negotiating with their wider supply chain for price discounts and rate revisions in an effort to reduce their operating costs during the ongoing oil and gas industry downturn, brought about by low oil prices and the coronavirus pandemic.

“It is hardly surprising that Aramco has asked the onshore LTA bidders for reduced rates,” another source said.

MEED earlier reported that Aramco had initiated a process in the fourth quarter of 2019 to form a pool of select contractors for executing onshore engineering, procurement and construction (EPC) jobs for its oil and gas projects across the Kingdom.

Invited contractors are understood to have submitted proposals for the planned onshore LTA scheme in December.

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Contractors that have submitted proposals for the Aramco onshore LTA programme are understood to include:

  • TechnipFMC (UK/France)
  • Samsung Engineering (South Korea)
  • JGC Corporation (Japan)
  • Saipem (Italy)
  • Tecnicas Reunidas (Spain)
  • ENPPI (Egypt)
  • Larsen & Toubro Hydrocarbon Engineering (India)
  • Nesma & Partners (Saudi Arabia)
  • Hyundai Engineering & Construction (South Korea)
  • Daelim (South Korea)
  • GS Engineering & Construction (South Korea)

The pool will have a structure similar to Aramco’s offshore LTA pool of contractors, and the client will sign LTA framework agreements with the chosen firms.

According to the original schedule, the framework agreements were to be signed before the start of Ramadan. With disruption to business caused by the coronavirus pandemic, it is unclear when Aramco will form this group.

Onshore LTA programme

Brownfield EPC jobs, ranging in value from $50m to $500m, are expected to be tendered to the onshore LTA grouping.

Jobs will be tendered through Aramco’s contracts release and purchase order (CRPO) system, on a work / time unit rate (TUR) basis, the client said in the proposal document.

Under the programme, Aramco would segregate onshore EPC projects based on their locations in zones 1 and 2, another source said.

Contractors selected for the onshore LTA pool are also likely to be assigned specific zones to focus on, based on their track record of working on projects in those zones, among other considerations, the source added.

Zone 1 comprises the following oil and gas field developments:

  • Wasit
  • Khurshaniyah
  • Abu Ali
  • Ras al-Khair
  • Safaniyah
  • Tanajib
  • Jubail
  • Berri
  • Juaymah
  • Qatif

Zone 2 consists of the following field developments:

  • Abqaiq
  • Ain Dar
  • Shedgum
  • Uthmaniyah
  • Udhilyah
  • Hawiyah
  • Haradh
  • Harmaliyah
  • Khurais
  • Ghawar
  • Shaybah

The LTA framework agreements will have a five-year duration, with two extendable options of three years each, available to the chosen contractors.

The selected firms will need to meet a Saudisation criteria of between 24% and 36% from the first year of the contract until the end of the extension period, in order to be considered for a spot in the LTA pool.

In addition, contractors need to have an In-Kingdom Total Value Add (IKTVA) score of 39% to 70% between 2020 and 2031, to stand a chance of securing a place in the group.

This article is published by MEED, the world’s leading source of business intelligence about the Middle East. MEED provides exclusive news, data and analysis on the Middle East every day. For access to MEED’s Middle East business intelligence, subscribe here.

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