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Adnoc awards $17bn EPC contracts for Hail and Ghasha

5 October 2023

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Abu Dhabi National Oil Company (Adnoc) has awarded $16.94bn-worth of engineering, procurement and construction (EPC) contracts for its Hail and Ghasha offshore sour gas field development project.

A consortium of Abu Dhabi’s National Petroleum Construction Company (NPCC) and Italian contractor Saipem has been awarded the offshore EPC package.

The value of the offshore contract is $8.2bn. The scope of work broadly involves EPC of offshore facilities, including facilities on artificial islands and subsea pipelines.

Italy-headquartered Tecnimont has been awarded the onshore EPC contract. The $8.74bn contract relates to the EPC of onshore facilities, including carbon dioxide (CO2) and sulphur recovery and handling.

Adnoc announced the award of EPC contracts, and reaching the final investment decision (FID), for the Hail and Ghasha project on the concluding day of the Abu Dhabi International Petroleum Exhibition and Conference (Adipec).

About 55 per cent of the investment value will flow back into the UAE’s economy under Adnoc’s In-Country Value (ICV) programme, it added.

MEED first reported in August that the consortium of NPCC and Saipem had emerged as frontrunners for the offshore package and Tecnimont for the onshore package. It was also recently reported that Adnoc was set to award EPC contracts and announce the FID during Adipec.

Net-zero gas production

The Hail and Ghasha fields are part of Abu Dhabi’s Ghasha concession, which is expected to produce more than 1.5 billion cubic feet a day (cf/d) of gas before the end of this decade.

Gas from the Ghasha concession is expected to “contribute to UAE gas self-sufficiency and Adnoc’s gas growth and export expansion plans,” Adnoc said in its statement on 5 October.

“The Hail and Ghasha megaproject aims to operate with net-zero carbon CO2 emissions, reinforcing Adnoc’s legacy of responsible energy production and supporting its net zero by 2045 ambition and accelerated decarbonisation plan,” it added.

The Hail and Ghasha development design combines decarbonisation technologies into one integrated solution. The project aims to capture 1.5 million tonnes a year (t/y) of CO2, in line with Adnoc’s committed investment for carbon capture capacity of almost 4 million t/y.

The CO2 will be captured, transported onshore and stored underground, while low-carbon hydrogen is produced that can replace fuel gas and further reduce emissions. The project will also leverage clean power from nuclear and renewable sources from the grid, Adnoc added.

“The carbon captured at Hail and Ghasha will support Adnoc’s wider carbon management strategy, which aims to create a platform that connects all the sources of emissions and sequestration sites to accelerate the delivery of Adnoc and the UAE’s decarbonisation goals,” Adnoc stated.

Execution of EPC works

The Abu Dhabi energy giant started a fresh EPC tendering round for the Hail and Ghasha project in late April, just days after cancelling the pre-construction services agreements (PCSAs) it signed with contractors in January.

Contractors expressed interest in participating in the latest Hail and Ghasha EPC tendering round by 19 May, MEED previously reported. Adnoc has since been in negotiations with contractors for the offshore and onshore EPC packages of the Hail and Ghasha scheme.

The new expression of interest document issued by Adnoc on 29 April detailed its latest EPC execution strategy for the Hail and Ghasha development. Under these plans, the offshore and onshore scope of work has been divided into three packages:

  • Package one: Subsea pipelines, umbilicals, cables, risers and other offshore structures
  • Package two: Offshore drilling centre facilities, the Ghasha offshore processing plant and central living quarters
  • Package three: The Manayif onshore processing plant, including offsite export pipelines and tie-ins, utilities, the main control building and process buildings. Work on a Ruwais sulphur-handling terminal and other non-process buildings is an optional scope for this package.

Adnoc then integrated the EPC scope of work on the project into an offshore and onshore package.

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PCSAs cancelled

The PCSAs signed in January with two consortiums, comprising three contractors each, marked the start of detailed engineering work and procurement of critical long-lead items for the offshore and onshore scope of work on the Hail and Ghasha development.

A consortium of France-headquartered Technip Energies, South Korean contractor Samsung Engineering and Tecnimont was awarded the PCSA for the onshore package. The contractors revealed the value of the contract to be approximately $80m.

Saipem, NPCC and state-owned China Petroleum Engineering & Construction Company (CPECC) won the PCSA for the offshore package, worth $60m.

Previously, the onshore work on the Hail and Ghasha scheme involved the construction of a gas process plant, pipeline network and new gas gathering units.

The offshore PCSA covered installing offshore platforms, gas compression facilities and more than 400 kilometres of subsea pipelines.

The reason for these PCSAs being annulled is unclear, but sources said the cost estimates submitted for the project were higher than Adnoc’s overall budget.

Protracted project timeline

The cancelled PCSAs were part of an early engagement process with contractors that Adnoc started following the termination of at least two earlier bidding rounds.

US engineering firm Bechtel completed the project’s original front-end engineering and design (feed) in 2019, with tenders for four EPC packages issued soon after.

Following the submission of commercial bids in early 2021, Adnoc made revisions to the feed as part of an optimisation process started by Technip Energies in November 2021. The revised feed aimed to reduce the scheme’s overall capital expenditure, which was previously estimated to be as high as $15bn.

The four original EPC packages were consolidated into two integrated offshore and onshore packages, thought to be worth as much as $5bn and $5.5bn, respectively, based on the previous version of the project.

MEED reported in September last year that early engagement contractors had submitted proposals for the detailed engineering work on the Hail and Ghasha development. The January PCSAs are understood to have been issued based on these proposals.

Hail and Ghasha fields

The Hail and Ghasha fields, along with the Hair Dalma, Satah, Bu Haseer, Nasr, Sarb, Shuwaihat and Mubarraz fields, are located in Abu Dhabi’s offshore Ghasha concession.

Adnoc holds the majority 55 per cent stake in the Ghasha concession. The other stakeholders are Italian energy major Eni with 25 per cent, Germany’s Wintershall Dea with 10 per cent and Austria’s OMV and Russia’s Lukoil, each with 5 per cent.

In November 2021, Adnoc and its partners in the Ghasha concession awarded two EPC contracts for the Dalma offshore sour gas development project. Abu Dhabi’s NPCC and Spain-headquartered Tecnicas Reunidas won contracts worth $1.46bn to execute offshore and onshore EPC works on the Dalma project, respectively.

Four artificial islands have already been completed in the Ghasha concession, and development drilling is under way.

In addition, Adnoc awarded two contracts totalling $2bn to its subsidiary Adnoc Drilling in July last year for the Hail and Ghasha offshore sour gas field development project.

The awards comprise a $1.3bn contract for integrated drilling services and fluids, and a $711m contract to provide four island drilling units. Their duration is 10 years.

Adnoc also awarded a third contract, valued at $681m, to another subsidiary, Adnoc Logistics & Services, to provide offshore logistics and marine support services for the planned Hail and Ghasha development.

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Indrajit Sen

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