Qatar Petrochemicals Delays Tenders for $5 Billion Al Shaheen Refinery by Six Months

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Researched by Industrial Info Resources (Sugar Land, Texas)--In view of the prevalent unfavorable market conditions, state-owned Qatar Petroleum (Doha, Qatar) has delayed the tendering process of key contracts for its proposed Al Shaheen refinery at the Mesaieed Industrial City in Qatar by about six months. The firm is currently in the process of reviewing the engineering, procurement and construction (EPC) rates for the $5 billion refinery project. The refinery, which was originally scheduled to go on stream by the first quarter of 2012, is now slated for commissioning in 2013.

Qatar Petroleum issued an invitation to bid for the project in June after seven firms pre-qualified for the process in March. The pre-qualified contractors who were advised not to proceed with the submission of technical bids for the project were Bechtel (San Francisco, California), GS Engineering & Construction Corporation (SEO:006360) (Seoul, South Korea), Hyundai Engineering & Construction Company (SEO:000720) (Seoul), JGC Corporation (TYO:1963) (Tokyo, Japan), SK Engineering & Construction Limited (Seoul), Snamprogetti SpA (San Giuliano, Italy) and Technip (EPA:TEC) (Paris).

Six subcontractors who pre-qualified for the bid include Chicago Bridge & Iron Company N.V. (NYSE:CBI) (Amsterdam, The Netherlands), CTCI Corporation (TPE:9933) (Taipei, Taiwan), Daelim Industrial Company Limited (SEO:000210) (Seoul), Daewoo Engineering & Construction Company (SEO:047040) (Seoul), Foster Wheeler Limited (NASDAQ:FWLT) (Clinton, New Jersey) and Samsung Engineering Company Limited (Seoul).

The deadline for technical bids for the EPC contract was originally set for October 15, 2008, but was postponed to December 15, 2008. Subsequently, the deadline for commercial bids, originally slated for January 21, 2009, was postponed to March 31, 2009. The firm now expects to relaunch the tendering process for technical bids in the second quarter of 2009.

Plans for the proposed project include a grassroot refinery with a capacity of 250,000 barrels per day (BBL/d) to produce diesel oil, gasoline and jet fuel and other hydrocarbon derivatives, including bitumen and green coke. Feedstock for the refinery was to be procured from the Al Shaheen field. The scope of the project included the installation of crude oil pipelines, distillate hydrotreaters, hydrocrackers and fluid catalytic cracking units (FCCU), summarization units, naphtha hydrotreaters and splitters, twin catalytic reformers, vacuum distillation units, and import and export facilities.

Jacobs Engineering Group Plc (NYSE:JEC) (Pasadena, California) and Beicip Franlab (Paris) carried out the pre-front-end engineering and design (FEED) studies for the project. In August 2007, Qatar Petroleum awarded the FEED and project management contract to Technip, which concluded the FEED study for the project in the third quarter of this year. In April 2008, Axens (Rueil-Malmaison, France) secured engineering design contracts for three units of the project including a 60,000-BBL/d residue FCCU, a 51,000-BBL/d vacuum residue desulfurization unit, and a 30,000-BBL/d gasoline desulfurization unit.

The announcement to delay the Al Shaheen refinery project follows a similar decision by Qatar Petroleum to postpone a $2.6 billion petrochemical plant in the Mesaieed Industrial City by one year because of the prevalent credit crunch in the market and ensuing difficulties in financing the project. The project was first announced in 2005 as a 70:30 joint-venture initiative between Qatar Intermediate Industries Holdings Company, a subsidiary of Qatar Petroleum, and Honam Petrochemical Corporation (SEO:011170) (Seoul). In 2007, Foster Wheeler secured the contracts for engineering and design as well as for construction and project management for the plant. The unit was slated to begin operation in 2009 with a combined production capacity of 900,000 tons per year of propylene and polypropylene based on a feedstock of ethane and naphtha to be supplied by Qatar Petroleum. The project is currently under review and the plant is now scheduled to go on stream in 2012.

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