Eric Watkins
Oil Diplomacy Editor
LOS ANGELES, Dec. 1 -- Saudi Aramco, continuing to review and delay major projects in the light of the global financial crisis, has cancelled plans for a $1.2 billion project to restart production from its historic Dammam oil field.
"We were told it is not a priority in the current environment," said one international contracting executive, who added that, "It has been cancelled for the time being but may be looked at again in the future."
Apart from general financial considerations, Dammam oil field development was considered especially expensive due to its location under the city of Dhahran—a highly populated area—which added environmental and safety concerns.
"I'm sure also that due to the area being populated, the cost for redevelopment was excessive," said another industry source, who noted that the project could be rebid at a later date.
Oil was first discovered in Saudi Arabia in 1938 at what is now known as the Prosperity well in Dammam field. The field has never produced more than 10,000 b/d of oil.
However, following recent seismic studies lasting some 18 months, Saudi Aramco had been looking to produce some 100,000 b/d of crude oil and 100 MMcfd of natural gas from Dammam field, possibly by yearend 2012.
Industry sources said the project involved drilling at least two new production wells along with water injection facilities and laying some 100 km of pipeline.
Aramco had invited companies to express their interest in a front-end engineering and design study to be awarded in early 2009.
The study was expected to take around 9 months and construction 3 years, putting startup in late 2012 or early 2013, at the earliest.
Contractors were expected to bid for a contract to perform the feasibility study, but after a number of contractors prequalified, Aramco told interested companies it had cancelled the bidding process.
It did not say which firms had prequalified, but most major contracting firms—including France's Technip, Foster Wheeler and Fluor of the US, and Canada's SNC Lavalin—were expected to bid for the contract.
In addition to the Dammam cancellation, Saudi Aramco has chosen to delay several other projects this month in the wake of the global financial problems: the 400,000 b/d Yanbu refinery (OGJ, Nov. 17, 2008, p. 29), the 900,000 b/d Manifa oil field development (OGJ Online, Nov. 19, 2008), and construction of a 400,000 b/d refinery at Jubail (OGJ Online, Nov. 25, 2008).
Contact Eric Watkins at [email protected].
