Technip Secures Two Turnkey Contracts for Satorp's Jubail Export Refinery

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Researched by Industrial Info Resources (Sugar Land, Texas)--Technip (OTC:TKPPY) (Paris, France) has secured two lump-sum, turnkey contracts for setting up crude and hydrotreating process units at an export-oriented grassroots refinery being developed by Saudi Aramco Total Refining and Petrochemical Company (Satorp) (Jubail, Saudi Arabia) at the Jubail industrial area in Saudi Arabia. Although Technip has not officially disclosed the value of the contracts, the two orders are reported to have a combined value of $3 billion.

Under the first contract, Package 2A, Technip will provide engineering, procurement and construction (EPC) services for the hydrocracking and catalytic cracking conversion units. The value of the contract is reported to be $1.7 billion. Under the second contract, Package 5A, the firm will construct some of the utility units, the process control system and the interconnecting network of the entire refinery. The value of this contract is reportedly estimated to be $1.3 billion. Scheduled for completion during the second quarter of 2013, the contracts will be jointly executed by the firm's operating centers in Paris and Rome, with assistance from local operations in the Middle East. Technip will reportedly work alongside EPC company CTCI Corporation (TPE:9933) (Taipei, Taiwan) for execution of Package 5A.

Satorp is a joint venture between Saudi Arabian Oil Company (Saudi Aramco) (Dhahran, Saudi Arabia) and Total SA (NYSE:TOT) (Paris, France). Saudi Aramco holds a 62.5% stake, while Total holds the balance of the joint venture. Subject to regulatory approvals, Saudi Aramco plans to offer a stake of 25% in the venture to the Saudi public in an initial public offer during the last quarter of 2010. Saudi Aramco and Total would then each have 37.5% stakes.

In May 2006, the two firms signed a memorandum of understanding for developing the project. In August 2006, Technip was appointed to conduct front-end engineering and design and the environmental impact assessment for the project, prepare marketing and financing studies, estimate capital costs, prepare bid packages, and provide procurement support.

In July 2008, Saudi Aramco and Total entered into a partnership agreement and established Satorp to develop a grassroots refinery capable of processing 400,000 barrels per day (BBL/d) of Arabian heavy crude oil to be procured from the 900,000-BBL/d Moneefa oilfield. The original cost of the refinery was pegged at $6 billion, which doubled to nearly $12 billion when commodity prices rose last year. However, Saudi Aramco and Total delayed the bidding process for EPC contracts by about seven months. The companies benefited from the plunge in prices of raw materials and were able to renegotiate the cost of contracts. The total cost of the project is now estimated at $9.6 billion.

Tecnicas Reunidas SA (MCE:TRE) (Madrid, Spain) has been awarded a $1.67 billion EPC contract, Package 1, for setting up the distillation and hydrotreating units. The contracts secured by Technip and Tecnicas Reunidas are estimated to be the largest of the 15 contracts being awarded by Satorp for completion of the project. The joint venture has already awarded contracts worth an estimated $7 billion for the project. Daelim Industrial Company Limited (SEO:000210) (Seoul, South Korea) secured a $400 million contract for setting up a desulfurization unit. A consortium of Samsung Engineering Company Limited (SEO:028050) (Seoul) and Chiyoda Corporation (TYO:6366) (Yokohama, Japan) won an $850 million contract for developing the coker unit, while Samsung Engineering won another contract worth $650 million for developing the aromatics unit. SK Engineering & Construction Limited (Seoul) secured a contract worth $850 million for developing plant utilities. Dayim Punj Lloyd Construction Contracting Company (DPL) (Riyadh, Saudi Arabia) secured an EPC contract worth $247 million for developing a port tank farm and a vapor recovery system for the refinery. DPL is a joint venture of Dayim Holdings (Riyadh) and Punj Lloyd Limited (BSE:532693) (New Delhi).

The refinery will produce 170,000 tons per year of paraxylene, 140,000 tons per year of benzene, and 200,000 tons per year of polymer-grade propylene. The facility will also maximize production of jet fuel and diesel. While the refinery will primarily be export-oriented, a portion of the overall production will also be used to cater to spikes in domestic demand. Construction of all facilities is scheduled for completion by the last quarter of 2012, and commercial production is slated to begin in the second half of 2013. The project is estimated to generate 1,200 direct and 6,000 to 7,200 indirect employment opportunities.

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