Saudi Aramco Cancels McDermott Contracts Worth $1.8 Billion

By Charles Kennedy 

Saudi Aramco has canceled three contracts with U.S. McDermott for the expansion of the Zuluf field, which will cost several billion dollars.

The contracts themselves were worth some $1.8 billion, Oil and Gas Middle East reports. The news follows a report earlier this month from Energy Intelligence, which cited unnamed sources as saying Aramco was reviewing its deals with McDermott.

The reason for the cancelation, the Saudi state energy giant said, was McDermott’s inability to present bank guarantees that Aramco requires from winning bidders.

It was not only these three contracts that Aramco canceled, however. It has called off the bidding process for other activities in Zuluf expansion, per a report in Upstream.

“The formal cancellation of Zuluf contracts is a setback for international contracting giants including McDermott, which have been eyeing the multiple development projects,” one unnamed source told the news outlet.

After kicking out McDermott, according to sources, Aramco will be looking for other companies that can step in. Italy’s Saipem is one option and Abu Dhabi’s National Petroleum Construction Co. may be another candidate.

Aramco is expanding three fields: Marjan, Berri, and Zuluf. The expansion of the Marjan field is seen adding 300,000 bpd to its production capacity. The expansion of the Berri field should boost its capacity by 250,000 bpd. Zuluf’s expansion is set to add a processing facility with a capacity of 600,000 bpd.

The projects are part of Aramco’s plan to boost its production capacity to 13 million barrels daily. This should happen by 2027, according to energy minister Abdulaziz bin Salman.

"We have no money to waste on anywhere else," bin Salman said last year at an industry conference, noting that with the expansion plans, Saudi Arabia’s oil production could reach 13.2 to 13.4 million barrels daily by 2027.

By Charles Kennedy for Oilprice.com