Doha takes risk on new method

The Gulf state is no longer looking to ramp up petrochemical production slowly, but rather to add a massive amount of capacity within a short timeframe

Qatar’s petrochemicals industry has earned a reputation for delivering high-quality products to the global market. This has been achieved by slowly ramping up production and ensuring the quality of the intermediate chemicals it supplies to its customers.

Now, with two planned megaprojects, the Gulf state is no longer looking to ramp up production slowly, but rather to add a massive amount of capacity in a short timeframe. This is a risk that Doha feels it is now ready to take, and there is no denying it has enough experience in the petrochemicals sector to achieve this hike in production of almost 5 million tonnes a year.

One scheme is Al-Karaana, Qatar Petroleum’s (QP’s) joint venture with the UK/Dutch Shell, which will be tendered in the first quarter of 2014. Several international engineering, procurement and construction (EPC) contractors look set to team up to tackle the scheme. What is unusual about the project is that despite having a budget of $6.4bn, only two packages will be released to contractors. This means there are very few firms willing to take on the risk of the packages that may be worth in excess of $3bn each. What may also strike many as unusual is how firms who are usually extremely competitive when bidding on projects can team up effortlessly when needed.

International EPC contractors working in the region generally have a solid track record when it comes to forming consortiums and this scheme should be no different. It is more prevalent in the power and water sector than oil and gas and petrochemicals, but on most occasions when it has happened, there have been no major disagreements between group members.

Whether a two-package strategy will be cheaper than releasing four or five packages will be unknown until the bids are in. If it is a success, QP will want to emulate this strategy on its upcoming Al-Sejeel scheme.

© Meed, August 2013