Foreign firms eye more Aramco deals
Khobar, April 14, 2010
Foreign engineering firms hope new partnerships with Saudi companies will increase their chances of winning deals from state oil giant Saudi Aramco, industry sources said.
The partnerships should give domestic Saudi firms more access to Aramco's larger projects, and increase the role of foreign firms in small and medium projects.
Detailed preliminary engineering work for Aramco's mega projects has so far been conducted by international firms outside of the world's top oil exporter.
"The front-end engineering and design (FEED) has never been done in-kingdom before. With the infusion of the technical capabilities of international companies, this will happen," a source from an international company said. "What used to be done outside the kingdom will be done here," he added.
New contracts, called long-term new general engineering services plus (GES+), aim to allow local companies to enter into joint ventures with international firms and provide detailed engineering, project management and technology services on a larger scale.
In 2001, Aramco signed several deals for general engineering services (GES) to encourage local firms to carry out basic engineering work in the kingdom and help create more jobs for Saudi nationals.
Eventually, local engineering firms in partnerships could develop preliminary design and engineering for Aramco's megaprojects, which involve armies of tens of thousands of labourers.
Foreign firms in turn would tap into small and medium projects by offering along with their local partners full engineering services. Local companies at present undertake the work on small to medium projects.
"International companies are actually entering into a segment of the market which was precluded until yesterday," another source from a foreign company said.
Technip, Foster Wheeler, WorleyParsons, Jacobs Engineering Group and SNC-Lavalin Group are among 10 consortiums that submitted prequalification documents to compete for GES+ contracts with local companies, a source from an international company said. The deadline for submission was in January.
"We have a strategy to enter into these small to medium size projects because we want to increase our proximity in the local strength to the client ... If you want to be present in the market you must be able to cover all segments," the source said.
Aramco plans to invite seven shortlised firms to bid for the GES+ contracts in the second half of April. It will then select five companies and award deals in July, the source said.
Aramco would make slight savings on the costs of outsourcing the engineering work, he said.
The conservative Gulf Arab state has a range of initiatives to improve Saudi participation in the private sector and lower its dependence on expatriate workers. It needs to create jobs for a rapidly growing young population. – Reuters