State-owned oil and gas major Saudi Aramco is set to cancel three offshore contracts it had previously awarded to offshore engineering contractor McDermott, cumulatively worth $1.8bn.

According to reports, withdrawal from the deals stems from McDermott’s inability to provide the performance bank guarantees required by Aramco.

The three contracts were originally for the engineering, procurement, and construction of an expansion to Aramco’s Zuluf oil field in the Arabian Gulf in Saudi Arabia.

The news follows a talk earlier this month that suggested Aramco was reviewing the status of the three contracts awarded to McDermott. Several people familiar with the matter told Upstream that all key bidders involved in the process for contract release had been informed of the decision to withdraw by Aramco.

A source said that “the formal cancellation of Zuluf contracts is a setback for international contracting giants, including McDermott, which have been eyeing the multiple development projects” for some time.

The contract terminations could cause delays at the Zuluf expansion project, which has been in the works for several years. Aramco has also called off the bidding process for other activities relating to the expansion.

Aramco will be looking for other companies to McDermott’s place, reports say. Italy’s Saipem could be in the running with Abu Dhabi’s National Petroleum Construction Company, another potential partner.

On top of Zuluf, Aramco is in the process of expanding its Marjan and Berri oil fields. The expansion of the Marjan field is expected to add approximately 300,000 barrels per day (bpd) to its production capacity while the expansion of the Berri field is hoped to boost capacity by 250,000bpd.

The Zuluf expansion is set to add a processing facility with a 600,000bpd capacity.

The projects are part of Aramco’s goal to boost production capacity up to 13 million barrels per day, which should happen by 2027, energy minister Abdulaziz bin Salman told reporters in May last year.