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  Aramco spending lifts Saudi upstream market

  16 September 2024

  Saudi Aramco’s profits in the second quarter and first half of 2024 may have slid on a year-on-year basis, but that has not impacted the company’s capital expenditure (capex). Project spending, on the contrary, has spiked sharply.

  Capex rose to $12.13bn in the second quarter from $10.46bn in the same period last year. Second-quarter capex also increased from the first quarter, during which Aramco spent $10.83bn. In the first half of the year, the company’s spending increased to $22.96bn, compared to $19.20bn in the first half of 2023, Aramco said.

  Aramco has demonstrated robust capex so far this year on major projects that are critical to its strategic upstream goals of maintaining oil production potential at 12 million barrels a day (b/d) and raising gas production by 60% by 2030, with 2021 as its baseline.

  Robust offshore spending

  In late January, the Saudi Energy Ministry directed Aramco to abandon its campaign to expand its oil production spare capacity from 12 million b/d to 13 million b/d by 2027. As a direct consequence of that government decision, Aramco cancelled the tendering process for at least 15 tenders involving engineering, procurement, construction and installation (EPCI) of structures at key offshore oil and gas fields.

  Since that decision, however, Aramco has gone the other way. The Saudi energy giant has already spent an estimated $4bn-$4.5bn year-to-date on offshore EPCI contracts, known in the Aramco ecosystem as Contracts Release and Purchase Orders (CRPOs).

  Italian contractor Saipem has been the biggest beneficiary of this robust offshore spending by Aramco, winning all of the CRPOs awarded so far this year.

  In early May, Aramco awarded Saipem the contract for CRPO 143, which involves replacing an oil line between the Berri and Manifa oil fields in the kingdom’s Gulf waters.

  Aramco then awarded Saipem the contract for CRPO 138, which involves laying a trunkline at the Abu Safah offshore field. The contract is estimated to be worth $500m.

  The Milan-listed contractor then scooped three major CRPOs in August, starting with CRPOs 132 and 139, whose combined value is estimated to be about $1bn. The scope of work for the two contracts involves the EPCI of structures to upgrade the Marjan, Zuluf and Safaniya offshore field developments, respectively.

  Just days after awarding CRPOs 132 and 139 to Saipem, Aramco awarded the Italian contractor CRPO 127, worth an estimated $2bn-$2.5bn. It involves EPCI works for several structures at the Marjan field development.

  Offshore jobs under bidding

  Meanwhile, offshore service providers in Aramco’s Long-Term Agreement (LTA) pool of contractors are preparing bids for eight more CRPOs.

  Aramco had issued a fresh batch of four tenders – CRPOs 149, 150, 152 and 153 – which cover the EPCI works on Saudi Arabia’s Abu Safah, Arabiyah, Hasbah and Marjan offshore oil field developments.

  Prior to those four tenders, Aramco issued four other tenders in May to its LTA contractors as part of a project to further expand the Zuluf offshore field development. The main objective of the project is to install several structures at the Zuluf field to maintain and raise its long-term oil and gas production potential. The combined value of CRPOs 145, 146, 147 and 148 is estimated to be about $4bn. LTA contractors were initially due to submit bids for the four tenders by 22 August, but Aramco eventually extended the deadline until 17 October.

  Prioritising gas production

  Saudi Aramco has registered swift progress this year with the successive expansion phases of its programme to produce and process gas from the Jafurah unconventional development in Saudi Arabia.

  Aramco officially awarded contracts on 30 June for the Jafurah second expansion phase, which aims to raise its processing potential to up to 2 billion cubic feet a day (cf/d) of raw gas produced from the Jafurah field.

  Aramco awarded 16 contracts worth about $12.4bn for EPC works and drilling services for the second expansion phase.

  Within weeks of those awards, a consortium of Spanish contractor Tecnicas Reunidas and China’s Sinopec Group announced that Aramco had selected it for EPC works on the third expansion phase, worth $2.24bn. The EPC scope of work mainly entails building three gas compression plants, each capable of processing 200 million cf/d.

  Also in July, Aramco issued the main EPC tender for the fourth expansion phase. Contractors are preparing bids for the project, whose scope of work is similar to that of the third expansion phase and is, hence, understood to be of similar value.

  Aramco said last year that it expected its total capex in 2024 to be in the range of $48bn to $58bn. As the first eight months of the year have demonstrated, far from witnessing a slump in capex, 2024 may well turn out to be a record year for Aramco’s project spending.

  Looking beyond 2024, Amin Nasser, Aramco’s president and CEO, told MEED in May that he expects his company to ramp up capex in the next two years as it strives to achieve its strategic 2030 goals. This capex guidance indicates that Aramco’s spending boom on oil production and gas production capacity expansion projects could extend into 2026.

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  Indrajit Sen
• 
  Taqa rebrands operating companies

  16 September 2024

  Energy and utility developer and investor Abu Dhabi National Energy Company (Taqa) has rebranded several companies operating under its umbrella.

  According to Taqa, Abu Dhabi Distribution Company (ADDC) and Al-Ain Distribution Company (AADC) will be brought under a single new brand and will operate as a single entity serving customers throughout the emirate of Abu Dhabi. The new brand will be called Taqa Distribution.

  It said the move “brings scale to Taqa’s customer-facing business and will enable it to further develop its customer services, develop new products and services and to seek opportunities for further growth in the UAE and internationally”.

  The company added that Taqa Distribution is expected to play a key role in Taqa’s ambition to champion low-carbon power and water and strengthen its operational efficiency.

  Taqa will also rebrand three wholly-owned operating companies.

  Abu Dhabi Transmission & Despatch Company (Transco) will become Taqa Transmission, leading the operation and development of Taqa’s domestic and international power and water transmission infrastructure.

  Sustainable Water Solutions Holdings (SWS Holdings) will be rebranded as Taqa Water Solutions, leading the operation of Taqa’s wastewater treatment facilities and the production of recycled water in Abu Dhabi. SWS was previously Abu Dhabi Sewerage Services Company.

  Abu Dhabi Energy Services (Ades) will become Taqa Energy Services, facilitating demand optimisation and providing tailored energy management solutions.

  Taqa's activities cover the entire utility value chain, including generation, transmission, distribution, water solutions and energy services.

  Established in 2005, Abu Dhabi-listed Taqa maintains and operates utility assets in Canada, Ghana, India, Morocco, Oman, the Netherlands, Saudi Arabia, the UK, the US and the UAE.

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  Jennifer Aguinaldo
• 
  One bid for Jubail 4 & 6 IWP scheme

  16 September 2024

  One consortium has submitted a proposal for a contract to develop an independent water project (IWP) in Jubail in Saudi Arabia’s Eastern Province.

  The contract covers developing and operating two water desalination plants – Jubail 4 and Jubail 6 – with a total combined capacity of 600,000 cubic metres a day (cm/d) using reverse osmosis technology.

  According to state water offtaker Saudi Water Partnership Company (SWPC), the sole bidder is a team comprising Saudi-headquartered companies Acwa Power, Haji Abdullah Alireza & Company (Haaco) and AlSharif Contracting & Commercial Development.

  MEED previously reported that at least two consortiums were expected to submit bids for the contract.

  The state water offtaker requested proposals for the Jubail 4 & 6 IWP in January this year, four months after it qualified nine individual companies and consortiums to bid for the contract.

  The following utility developers and investors were qualified to bid for the contract: 

  • Abu Dhabi National Energy Company (Taqa)
  • Acciona (Spain)
  • Acwa Power (local)
  • Ajlan & Bros (local) / Rawafid Industrial Company (local)
  • Al-Jomaih Energy Water Company (local) / Sogex Oman Company (local) 
  • GS Inima (Spain/South Korea)
  • International Power (Engie, France)
  • Marubeni Corporation (Japan)
  • Power & Water Utility Company for Jubail & Yanbu (Marafiq, local)

  The desalination plants will be located 18 kilometres south of Jubail Industrial City, adjacent to four existing desalination units – Jubail phase one, Jubail phase two, and the Jubail 3A and 3B IWP facilities.

  As with the previous seawater reverse osmosis (SWRO) IWP contracts awarded in the kingdom, the successful bidder, through a project company, will develop the project and sell the entire capacity and output to SWPC under a 25-year water-purchase agreement (WPA).

  A credit support agreement from the government of Saudi Arabia backs SWPC’s obligations under the WPA.

  SWPC’s transaction advisory team for the project comprises Netherlands-headquartered KPMG Professional Services as lead and financial adviser, UK-based Eversheds Sutherland as legal adviser and Canada’s WSP as technical adviser.

  It also appointed UAE-based Future Water & Power Consulting to assist with the project tender and with finalising the site studies required for the bid.

  Recent IWPs

  SWPC has so far awarded the contracts for six IWP projects: Rabigh 3, Shuqaiq 3, Yanbu 4 (Ar-Rayis 1), Jubail 3A, Jubail 3B and Rabigh 4. A seventh contract for developing the Shuaibah 3 SWRO plan was also directly negotiated and awarded in 2022.

  The seven IWP schemes have a total combined capacity of 3.3 million cm/d.

  SWPC received two bids in April for a contract to develop the 300,000 cm/d Ras Mohaisen IWP scheme.

  The bidders were Spain’s Acciona and a team comprising the local firms Acwa Power, Haaco and AlKifah Holding.

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  Jennifer Aguinaldo
• 
  Abu Dhabi extends 1.5GW Al-Khazna bid deadline

  16 September 2024

  Abu Dhabi state utility Emirates Water & Electricity Company (Ewec) has extended the bid deadline for a contract to develop Abu Dhabi's fourth utility-scale solar photovoltaic (PV) project.

  The planned Khazna solar independent power project (IPP), also known as PV4, will have a capacity of 1,500MW.

  It will be located in Khazna, between Abu Dhabi and Al-Ain, and is expected to reach commercial operation by 2027.

  Ewec requested proposals for the contract to develop and operate the solar IPP scheme in April and initially set the end of August as the last day for bidders to submit their proposals.

  MEED understands the revised tender closing date is 3 October.

  The state utility prequalified nine companies and consortiums as managing members and another 10 that can bid as consortium members.

  Parties or companies prequalified as managing members are free to bid individually or as part of a consortium. These include:

  • Acwa Power (Saudi Arabia)
  • EDF Renewables (France)
  • International Power (Engie, France)
  • Jera Company (Japan)
  • Jinko Power (China)
  • Korea Electric Power Corporation (Kowepo, South Korea)
  • Marubeni Corporation (Japan)
  • Sumitomo Corporation (Japan)
  • TotalEnergies Renewables (France)

  The following companies can bid as part of a consortium with a managing member: 

  • Al-Jomaih Energy & Water (Jenwa, Saudi Arabia)
  • Avaada Energy (India)
  • Buhur for Investment Company (Saudi Arabia)
  • China Machinery Engineering Corporation (China)
  • China Power Engineering Consulting Group International Engineering Corporation (CPECC, China)
  • Kalyon Enerji Yatrimlari (Turkiye)
  • Korea Western Power Company (Kowepo, South Korea)
  • Orascom Construction (Egypt)
  • PowerChina International Group
  • SPIC Huanghe Hydropower Development (Spic, China)

  A transaction advisory team comprising US-headquartered Ashurst and Alderbrook Finance and Norwegian engineering services firm DNV is advising Ewec on the 1.5GW Al-Khazna IPP scheme.

  Solar energy is integral to achieving Abu Dhabi's target of producing nearly 50% of its electricity from renewable and clean energy sources by 2030.

  In April, Ewec awarded the contract to develop PV3, the 1,500MW Al-Ajban solar IPP, to a team led by French utility developer EDF Renewables and including South Korea's Korea Western Power Company (Kowepo).

  Like the first three schemes, the Khazna solar PV will involve the development, financing, construction, operation, maintenance and ownership of the plant and associated infrastructure.

  The successful developer or developer consortium will own up to 40% of the entity, while the Abu Dhabi government will retain the remaining equity.

  The developer will enter into a long-term power-purchase agreement with Ewec.

  Once fully operational, the Khazna solar PV, along with Noor Abu Dhabi, the Al-Dhafra solar PV and Al-Ajban solar PV, will raise Ewec's total installed solar PV capacity to 5.5GW and collectively reduce CO2 emissions by more than 8.2 million metric tonnes a year by 2027. 

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  Jennifer Aguinaldo
• 
  Infrastructure schemes support Riyadh’s ambitions

  13 September 2024

  

   

  Saudi Arabia reiterated its commitment to achieving its Vision 2030 goals when it launched the prequalification process in August for what, upon completion, Riyadh says will be the ‘world’s largest airport’.

  The kingdom is also taking giant strides towards improving the traffic situation in the capital as it prepares to expand the Riyadh metro lines further and develop new roads. 

  The moves are in line with Riyadh’s ambitions for infrastructure development, which aim to transform the kingdom’s economy and position it as a global hub for investment, tourism and innovation. Under Vision 2030, the country is undertaking a wide range of infrastructure projects that reflect its ambition to diversify its oil-dependent economy and improve the quality of life for its citizens, especially around the more established urban centres.

  Airport ambitions 

  The key to Riyadh’s success is developing infrastructure across the country. According to regional projects tracker MEED Projects, there are $247bn-worth of active transport projects in Saudi Arabia.

  Airports represent a significant subsector, accounting for $67bn of planned or underway projects, or about 27% of the transport total.

  The largest upcoming airport project is the development of King Salman International airport, which will ultimately expand and replace the existing King Khaled International airport. Contractors are teaming up to deliver the airport’s main packages, aiming to accommodate up to 120 million passengers by 2030 and 185 million by 2050. For cargo, the goal is to process 3.5 million tonnes a year by 2050.

  The other major airport project planned in the kingdom is the Abha International airport in the Asir province. In May, interested companies submitted their statements of qualifications for a contract to develop and operate a new passenger terminal building and related facilities at the airport. The project will be developed using a build-transfer-operate model.

  Resurgence of rail

  Rail projects have revived in the kingdom after a lull of several years. Rail accounts for about 30% of transport projects, with almost $75bn of active projects.

  The most immediate of the upcoming rail schemes is the expansion of the Riyadh Metro scheme. It is understood that the bid evaluation has reached the final stages, and the contract will likely be awarded by the end of October. The Line 2 extension is 8.4 kilometres (km), of which 1.3km is elevated and 7.1km is underground. It includes five stations – two elevated and three underground.

  The other significant project is adding Line 7 to the Riyadh Metro scheme. The tender for the main contract is in the market, and the project will likely be awarded by Q3 next year.

  Nationally, the largest upcoming rail scheme is the long-awaited Saudi Landbridge project, which involves building railways to connect ports and industrial areas on the Red Sea coast in the west with Riyadh in the centre of the kingdom and the Gulf coast in the east.

  Other rail projects planned include high-speed connections between Riyadh and other GCC capitals, including Doha and Kuwait City, urban rail projects in Riyadh and the Saudi sections of the GCC railway network.  

  Roads development 

  Expanding the Saudi road network is essential to completing the transport infrastructure rollout. The kingdom has $57bn of road projects under development, which accounts for about 23% of the transport total. 

  Some of the major schemes under development are in Riyadh and are being undertaken by the Royal Commission for Riyadh City (RCRC). The masterplan consists of developing 15 road schemes in the capital, four of which are in execution. 

  These include the construction of phases two and three of the second southern ring road scheme. Earlier this year, RCRC awarded an estimated SR7.5bn ($2bn) of contracts to construct these projects.

  The second project is the upgrade of the Wadi Laban cable bridge in Riyadh, for which the client awarded a SR4bn ($1bn) design-and-build contract earlier this year.

  The third project involves developing the western part of the Al-Thumama Road Axis, which is 6km long and extends from King Khalid Road in the west to King Fahd Road in the east.

  The fourth road project extends from Taif Road in the Laban neighbourhood to the Qiddiya project. The package has a total length of 16km.

  Firms are also submitting bids for the contract to deliver the second section of the Al-Thumama Road development project in Riyadh, which stretches from Mohammed Bin Salman Road to Uthman Bin Affan Road and has a total length of 8.8km.

  These schemes will provide vital links between the new and expanded airport and ports and the other projects under development in the kingdom.

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  Yasir Iqbal