meed-logo

line1 line2 line3
SIGN IN / REGISTER

MGS spending lifts Saudi downstream sector

15 March 2024

 

The selection of contractors by Saudi Aramco for its third expansion phase of the Master Gas System network (MGS-3) has galvanised Saudi Arabia’s midstream and downstream sectors.

Aramco has divided engineering, procurement and construction (EPC) works on the estimated $10bn MGS-3 project into 17 packages. The first two packages involve upgrading existing gas compression systems and installing new gas compressors. The 15 other packages relate to laying gas transport pipelines across various locations in the kingdom.

Aramco issued letters of intent in February to contractors for 16 EPC packages of the MGS-3 project. Some of the successful contractors have also confirmed their selection by Aramco.

The original Master Gas System (MGS) was built in the 1970s and commissioned in 1982. Since then, Aramco has been supplying natural gas to its customers across Saudi Arabia via the network, mainly channelling associated gas from Ghawar and other oil fields.

Over the past decade, amid rising gas demand from Saudi Arabia’s industrial and household sectors, Aramco has undertaken projects to increase its non-associated gas production. It launched the second expansion phase of the MGS in 2015.

Looking ahead, contractors have expressed interest in participating in the main EPC tendering process for package 16 of the MGS-3 project, which is the only EPC package not to be tendered by Aramco out of the 17 packages. The scope of work on package 16 covers the laying of a gas transport pipeline network of more than 50 kilometres in and around Jeddah.

The completion of the EPC tendering exercise – from solicitations of interest to the selection of contractors – for a scheme of the scale of MGS-3 within a year’s time underscores the commitment of Aramco, and of the Saudi government, to ensuring the steady growth of the kingdom’s gas sector.

Moreover, as Amin Nasser, president and CEO of Aramco, has said: “The recent directive from the government to maintain our maximum sustainable capacity [of oil production] at 12 million barrels a day provides increased flexibility, as well as an opportunity to focus on increasing gas production and growing our liquids-to-chemicals business.”

Liquids-to-chemicals ambition

Saudi Arabia is striving to become one of the world’s largest petrochemicals producers by the end of this decade. Its global liquids-to-chemicals programme involves expanding its portfolio of petrochemicals assets both at home and abroad.

State enterprise Aramco, along with its petrochemicals-producing subsidiary Saudi Basic Industries Corporation (Sabic), have been tasked with establishing 10-11 large mixed-feed crackers by 2030. These petrochemicals crackers, which include greenfield developments and expansions of existing facilities, will be built both in Saudi Arabia and in overseas markets.

Aramco’s global liquids-to-chemicals programme aims to convert 4 million barrels a day (b/d) of its oil production into high-value petrochemicals and chemicals feedstocks by 2030.

With a total capital expenditure by Aramco and Sabic of up to $100bn, it is the Middle East and North Africa’s largest petrochemicals spending programme ever, and will generate a significant amount of work for consultants and contractors in the run-up to 2030.

Aramco has divided its liquids-to-chemicals programme in Saudi Arabia into four main projects. It took a major step forward in September by appointing project management consultants (PMC) for the different segments of the investment scheme.

Aramco has selected US firm KBR, France’s Technip Energies, UK-based Wood Group and Australia-headquartered Worley to provide PMC services for the four projects, which include: 

  • Project East (PMC 1) – involves converting the Saudi Aramco Jubail Refinery Company (Sasref) complex in Jubail into an integrated refinery and petrochemicals complex by adding a mixed-feed cracker. The project also involves building an ethane cracker that will draw feedstock from the Sasref refinery.
  • Project West (PMC 2) – involves converting the Yanbu Aramco Sinopec Refining Company (Yasref) complex in Yanbu into an integrated refinery and petrochemicals complex through the addition of a mixed-feed cracker. Aramco and state-owned China Petroleum & Chemical Corporation (Sinopec) signed a memorandum of understanding in October for joint investment in the project, known as the Yanbu Refinery+ project.
  • Project X (PMC 3) – involves converting the Saudi Aramco Mobil Refinery Company (Samref) complex in Yanbu into an integrated refinery and petrochemicals complex by building a mixed-feed cracker. 
  • Project RTC (PMC 4) – involves establishing a crude oil-to-chemicals (COTC) complex in Ras Al Khair in the Eastern Province. Sabic is a partner in the Ras Al Khair COTC project.

Saudi Aramco is expected to start a separate tendering exercise for the provision of front-end engineering and design (feed) services on the projects in the future. Feed contracts are scheduled to be awarded in 2024, while the main EPC contracts are due for award in 2025.

Desulphurisation investments

As more sulphur recovery projects come online in Saudi Arabia, several Aramco gas treatment and processing plants in the Eastern Province and around the kingdom will discharge increased volumes of sulphur.

Existing and planned sulphur-handling facilities in the Eastern Province may not be able to cope with the incremental volumes of sulphur generated by Aramco assets in the future.

The company has therefore planned to develop a grassroots sulphur-handling complex at Ras Al Khair port to meet this requirement. The planned complex will facilitate the receiving, formation, storage and export of molten sulphur.

To be built on a public-private partnership (PPP) basis, the proposed facility is set to come online by 2029. Aramco has gauged the interest of third-party investors in developing the project.

The Ras Al Khair project is understood to be the second such PPP scheme launched by Aramco in the desulphurisation domain. Aramco is undertaking desulphurisation initiatives in line with its environmental commitments and emissions-reduction targets.

Aramco is understood to be close to awarding the build-own-operate-transfer contract for a major project that involves modifying and upgrading sulphur recovery units at seven of its gas processing plants in the Eastern Province, by building tail gas treatment units.

Two consortiums are competing for the multibillion-dollar PPP scheme, with Aramco expected to award the main contract later this year.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11595902/main49193808.jpg
Indrajit Sen

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Saudi Arabia foregoes April nuclear bid deadline

    2 May 2024

    The 30 April bid deadline for nuclear technology providers to submit bids for a contract to build Saudi Arabia's Duwaiheen nuclear power plant project has passed without any clear indication of a new tender closing date, according to two sources familiar with the project.

    "The understanding is that the tendering process requires a level of [political] stability in the region. This seems like an automatic postponement for the project tendering process," one of the sources said.

    Companies that have been invited and are expected to bid for the contract include:

    • China National Nuclear Corporation (CNNC, China)
    • Korea Electric Power Corporation (Kepco, South Korea)
    • Rosatom (Russia) 
    • EDF Group (France)

    The project is in the so-called bid invitation specification stage, and there are no direct negotiations taking place between the client and the potential bidders at this stage, MEED reported in July 2023.

    Saudi Arabia plans to build a large-scale nuclear power plant facility as part of its energy diversification agenda. 

    However, the ongoing conflict between Israel, Gaza and other neighbouring countries appears to be a major contributing factor to the extended procurement timeline of the Duwaiheen nuclear plant project.

    In October, an industry source said the ongoing conflict in Gaza is not likely to help advance negotiations between the countries with a key stake in the project.

    It is understood that Riyadh is using its nuclear power plant project, along with its plan to enrich uranium sources as part of its industrial strategy, as a bargaining chip with the US government. The White House is pushing for the normalisation of relations between Israel and Saudi Arabia and opposed to uranium enrichment.

    A month before the latest conflict between Israel and Hamas started, it was reported that senior Palestinian officials were in Riyadh for talks with senior Saudi and US officials.

    According to a BBC report in September 2023, the Palestinians were negotiating for hundreds of millions of dollars and more control of land in the occupied West Bank in the event of a three-way deal between Israel, Saudi Arabia and the US.

    On 14 October, Saudi Arabia suspended the talks on potentially normalising ties with Israel, which it never officially recognised as an independent state.

    Consultants

    Duwaiheen Nuclear Energy Company last year received three bids for the project management consultancy package for the nuclear plant project.

    MEED understands the following companies submitted proposals for the contract:

    • Atkins (UK/Canada)
    • Worley (Australia)
    • Assystems (France)

    Two of the three bidders have had previous engagements with the Saudi nuclear energy project. 

    2.8GW project

    The Duwaiheen nuclear power plant is expected to be procured using a traditional design-and-build model. 

    In September 2016, MEED reported that Saudi Arabia was carrying out technical and economic feasibility studies for the first reactors, and was also looking at possible locations for the kingdom’s first nuclear project, a 2.8GW facility.

    A site at Khor Duwaiheen, on the coast near the UAE and Qatari borders, was subsequently chosen for the first project.

    In March 2022, Saudi Arabia announced the establishment of a holding company – understood to be the Duwaiheen Nuclear Energy Company – to develop nuclear power projects in the country to produce electricity, desalinate seawater and support thermal energy applications.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11729932/main.jpg
    Jennifer Aguinaldo
  • Saudi Arabia enjoys growth conditions

    1 May 2024

    Register for MEED's guest programme 

    Sources: IMF (April 2024), MEED Projects, MEED

    MEED's April 2024 special report on Saudi Arabia includes:

    > GVT & ECONOMY: Saudi Arabia seeks diversification amid regional tensions
    > BANKING: Saudi lenders gear up for corporate growth
    > UPSTREAM: Aramco spending drawdown to jolt oil projects
    > DOWNSTREAM: Master Gas System spending stimulates Saudi downstream sector
    > POWER: Riyadh to sustain power spending
    > WATER: Growth inevitable for the Saudi water sector
    > CONSTRUCTION: Saudi gigaprojects propel construction sector
    > TRANSPORT: Saudi Arabia’s transport sector offers prospects

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11730016/main.gif
    MEED Editorial
  • Bapco and Masdar plan 2GW wind projects

    1 May 2024

    Abu Dhabi Future Energy Company (Masdar) has signed an agreement with Bahrain’s Bapco Energies to jointly explore developing and investing in wind projects with a capacity of up to 2GW.

    The agreement for near-shore and offshore wind farms is Masdar’s first in Bahrain.

    At up to 2GW, the clean energy collaboration will support Bahrain in accelerating the decarbonisation of critical industrial sectors and open avenues to develop new market sectors.

    Bahrain aims to reduce emissions by 30% by 2035 and achieve net-zero emissions by 2060, as outlined in its National Energy Strategy.

    Bapco Energies Group chief executive Mark Thomas said the partnership with Masdar “demonstrates our commitment to diversifying the kingdom of Bahrain’s energy mix to include cleaner energy sources, underscoring our role as leaders in renewable energy development”.

    Masdar has codeveloped several wind projects, including the 400MW Dumat Al Jandal wind farm in Saudi Arabia, the 630MW London Array offshore wind project in the UK, and the 103.5MW UAE wind programme, which utilises innovative technology to capture low wind speeds at utility scale.

    Masdar aims for a renewable energy portfolio capacity of 100GW by 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11729221/main.jpg
    Jennifer Aguinaldo
  • Developer appoints Luce Palm Jumeirah contractor

    1 May 2024

    Register for MEED’s guest programme 

    Taraf Properties, the real estate division of UAE-based investment group Yas Holding, has appointed Al Ashram Contracting as the main contractor to build the Luce Residences project in Dubai.

    Located on the east crescent of Palm Jumeirah, the beachfront development is a nine-storey residential building comprising 38 two-, three- and four-bedroom units.

    Local enabling contractor APCC Building Contracting won the enabling works contract for the Luce Residences in July last year.

    The piling works began in August last year. Abu Dhabi-based MZ Architects is the project consultant, and the project is scheduled to be completed by January 2026.

    Dubai real estate developments dominate the UAE’s construction market, with schemes worth over $323bn in execution or the planning phase.

    Growing demand for property in Dubai, combined with a resilient economy, has brought optimism to the emirate’s real estate market.

    As the market develops further, a broader range of opportunities is expected to emerge for both local and international contractors.

    This is in line with GlobalData’s forecast, which expects the UAE construction sector’s output to grow by 4% in real terms in 2024 and 4.2% in 2025, supported by developments in infrastructure, energy and utilities, and residential construction projects.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11728542/main.jpg
    Yasir Iqbal
  • Bids submitted for Sabic hydrogen project

    1 May 2024

     

    Register for MEED's guest programme 

    Bids have been submitted for a low-carbon hydrogen project that Saudi Basic Industries Corporation (Sabic) is due to develop in the industrial city of Ras Al Khair in Saudi Arabia’s Eastern Province.

    The project, known as the San VI Low-Carbon Hydrogen Complex, is estimated to be worth $300m.

    Bids for the project were submitted ahead of the deadline of 31 March 2024, according to information first obtained by MEED Projects.

    The following companies are understood to have submitted bids:

    • Larsen & Toubro (India)
    • JGC Corporation (Japan)
    • Samsung Engineering (South Korea)
    • Hyundai E&C (South Korea)
    • Toyo Engineering Corporation (Japan)

    When it was originally tendered in October last year, the project’s bid submission deadline was set for the end of December 2023.

    Sabic is also developing a second low-carbon hydrogen project, which is currently in the study phase.

    This project, known as the Horizon II Low-Carbon Hydrogen Complex, is also estimated to have a value of $300m.

    The scope of both projects is expected to include:

    • Construction of processing units
    • Construction of storage facilities
    • Construction of distribution units
    • Installation of hydrogen compressors
    • Construction of associated facilities

    The main contract tender for the Horizon II Low-Carbon Hydrogen Complex is anticipated to be issued by 2025.

    National oil company Saudi Aramco owns a 70% stake in Sabic.

    In October last year, Ashraf Al Ghazzawi, executive vice-president of strategy and corporate development at Aramco, said the company aims to produce 2 million tonnes of low-carbon hydrogen by 2030.

    MEED's April 2024 special report on Saudi Arabia includes:

    > GVT & ECONOMY: Saudi Arabia seeks diversification amid regional tensions
    > BANKING: Saudi lenders gear up for corporate growth
    > UPSTREAM: Aramco spending drawdown to jolt oil projects
    > DOWNSTREAM: Master Gas System spending stimulates Saudi downstream sector
    > POWER: Riyadh to sustain power spending
    > WATER: Growth inevitable for the Saudi water sector
    > CONSTRUCTION: Saudi gigaprojects propel construction sector
    > TRANSPORT: Saudi Arabia’s transport sector offers prospects

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11728618/main.gif
    Wil Crisp