Chinese firm looks to exit Saudi Aramco’s Marjan scheme

MEED    25 September 2020 (Last Updated September 25th, 2020 10:33)

Chinese firm looks to exit Saudi Aramco’s Marjan scheme

State-owned China Offshore Oil Engineering Company (COOEC) has made a formal request to Saudi Aramco to withdraw involvement in the estimated $15bn-plus Marjan offshore field development scheme, according to sources.

Aramco officially awarded contracts for the engineering, procurement and construction (EPC) works on the Marjan and Berri projects on 9 July 2019.

A consortium of US-based contractor McDermott and COOEC was awarded the estimated $3.5bn package 1 contract, which is the main component of the Marjan scheme and entails building the central gas oil separation plant (GOSP) system.

As per the EPCI contract awarded to the consortium, McDermott holds the lion’s share of the work on Marjan package 1, while the scope of work for COOEC covers fabrication, transport and offshore installation of some of the fixed platforms. Topsides were to be built in COOEC’s fabrication yard in Qingdao, China, while the jackets were to be built at the Zhuhai yard.

COOEC has previously said it signed its share of the package 1 contract, valued at $700m approximately, on 15 October 2019. Construction work on the package was to begin in the second quarter of 2020 and was scheduled for completion in the fourth quarter of 2022.

In June, MEED reported that Aramco had asked the Marjan project contractors to “slow down” project execution, amid the prevailing oil and gas industry downturn and global business disruption caused by the Covid-19 pandemic – a move that is estimated to delay overall completion of the scheme by at least a year.

Impact on Marjan package 1

COOEC has formally communicated to Aramco its intention to pull out of Marjan package 1 following a shift in internal corporate strategy, sources told MEED. It is not clear when such a request was made to Aramco.

Aramco is yet to make a decision on COOEC’s request and devise an execution strategy for Marjan package 1, as per the sources.

“It remains to be seen how Aramco deals with the situation. Package 1 is the biggest and most important aspect of the Marjan megaproject,” a source said.

“Should COOEC be allowed to leave, Aramco would either have to retender package 1 to the market, or distribute COOEC’s share of work to the other contractors involved in the project,” the source added.

McDermott, as the lead contractor on package 1, has approached Italian contractor Saipem and India’s Larsen & Toubro Hydrocarbon Engineering (LTHE) to discuss whether the firms would be interested in taking up some of COOEC’s share of work.

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