Saudi Aramco terminates multi-billion dollar contract for Zuluf field expansion

Seeking alternatives
Saudi Aramco terminates multi-billion dollar contract for Zuluf field expansion
Saudi Aramco (Photo Credit: Zuma)

Saudi Aramco has decided to terminate three contracts with McDermott, a U.S. company, for the expansion project of the Zuluf field. This cancellation comes with a significant financial impact, as the project was estimated to cost several billion dollars.

According to a report by Oil and Gas Middle East, the contracts were valued at approximately $1.8 billion. This development comes in the wake of a previous report from Energy Intelligence earlier this month, which cited undisclosed sources claiming that Aramco was reassessing its agreements with McDermott.

Read more: Aramco tops the list of world’s most profitable oil and gas giants in H1 2023

Saudi Aramco stated that the reason for the cancellation was McDermott’s failure to provide the bank guarantees mandated by Aramco for successful bidders.

In addition to the aforementioned three contracts, Aramco has decided to halt the bidding process for other activities related to the Zuluf expansion, as reported by Upstream.

Sources indicate that following the termination of McDermott’s contracts, Aramco is now seeking alternative companies to fulfill the project. Italy’s Saipem is being considered as one potential option, while Abu Dhabi’s National Petroleum Construction Co. is also being regarded as a potential candidate by Aramco.

13 million barrels by 2027

Aramco has initiated expansion projects in three fields: Marjan, Berri, and Zuluf. The expansion of the Marjan field is expected to increase its production capacity by 300,000 barrels per day (bpd). Similarly, the expansion of the Berri field aims to enhance its capacity by 250,000 bpd. As for the Zuluf field, the expansion plans involve the construction of a processing facility with a capacity of 600,000 bpd.

As per Saudi Energy Minister Abdulaziz Al Saud, these projects are integral to Aramco’s strategy of increasing its daily production capacity to 13 million barrels. The company aims to achieve this goal by 2027.

Expanding gas uses

Prior studies indicated the potential for crude oil production from the Karan field. This indication came even before its official discovery in 2006. The primary focus of these studies was on extracting deeper carbon lightening gas.

The field’s development began in May 2008. Remarkably, in July 2011, the first gas cargo was transported. It achieved an impressive rate of 400 million cubic feet per day. This significant milestone was reached just five years after the field’s initial discovery.

As part of its continuous endeavors, Saudi Aramco is actively working to enhance its crude oil and gas operations. One of its key focuses is increasing the utilization of gas. This increased utilization is targeted specifically in desalination plants and electricity generation.

In addition, the company has a goal to raise the percentage from the current 50 percent. Their aim is to achieve an impressive 70 percent utilization. This would position them as one of the highest in the world in terms of gas utilization.

Saudi Aramco remains dedicated to delivering substantial value to upcoming petrochemical plants. This commitment is an ongoing priority for the company. They are determined to contribute significantly to the success and growth of these upcoming facilities.

Additionally, the company is striving to boost its gas production with the goal of reaching 23 billion cubic feet by the year 2025.

Saudi Aramco

Revitalizing local procurement initiatives

Additionally, Saudi Aramco is making consistent progress in its efforts to maximize the economic and commercial potential of gas reserves. This achievement is made possible through the utilization of advanced drilling equipment. It is also accomplished by implementing multi-stage hydraulic fracking techniques. Additionally, the company harnesses the latest technologies in fields and reservoir management to maximize their operations.

Through the Karan project, the company set its sights on establishing a reliable fuel source for the refining industry, substituting costly liquid fuel with cleaner and more cost-effective natural gas. At the project’s peak construction phase, it generated over 11,000 construction jobs along with numerous permanent positions. This initiative played a key role in fortifying the local economy by fostering training and development opportunities for the local workforce.

Furthermore, with an infusion of $1.8 billion into the local economy and an additional $500 million spent on procuring materials from local markets, the project significantly contributed to the Kingdom’s economic resurgence through domestic procurement channels.

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