Duqm refinery project will put Oman directly on the path to prosperity. The refinery, once operational, will process 230,000bpd of crude oil and occupy 900 hectares in the Duqm industrial zone, with expected investments of up to $15bn over the next decade.
Duqm refinery is a greenfield project in Duqm, 550 kilometres south of Muscat along the coastline of Oman in the Al Wusta region. In April this year, Duqm Refinery and Petrochemical Industries Company (DRPIC) officially broke ground for its 230,000 barrels per day (bpd) refinery in Duqm.
The ground-breaking ceremony marked the launch of construction work for the project. The project is planned to be the cornerstone for other downstream petrochemical projects in the future. This partnership not only signifies the largest cross-border GCC investment into the downstream sector but also is an example of the largest foreign direct investment into Oman.
Duqm’s strategic location along the coast gives it access to the Indian Ocean and the Arabian Sea – a transatlantic highway for shipping lines and containers, allowing the refinery access to markets both east and west. Shipping lines choosing Duqm to offload crude oil, or take on the refinery’s products save two days of travelling time compared to other ports in the region.
A strategic partnership
The Duqm refinery project is the result of a strategic 50:50 partnership between Oman Oil Company (OOC) and Kuwait Petroleum International (KPI), which are respectively owned by the Omani and Kuwaiti governments. The strategic partnership between OOC and KPI will open doors to opportunities for other businesses in Duqm that can cater to auxiliary needs of the refinery. It will extend towards new horizons that will drive wider economic cooperation to serve the common interests between the two brotherly countries.
“Oman Oil Company performs the role of a catalyst to develop industrial hubs and regions in Oman. The Duqm refinery is one such project that symbolises the effective collaboration between Oman and Kuwait. We believe development of the refinery will support the business landscape in Duqm and will contribute to the creation of an attractive infrastructure for foreign investors, thereby developing the area further and adding jobs to the local economy,” said Eng. Isam bin Saud Al-Zadjali, CEO of Oman Oil Company, and chairman, DRPIC.
“The refinery will mark the beginning of a new era for both companies and will lead to new opportunities in the energy sector. This modern landmark will leverage the energy sector of the sultanate since it is a combination of integrity, maximisation of resources and development, to be laid in a very favourable region. Oman Oil Company and Kuwait Petroleum International will implement joint efforts to manage the refinery, execute its operations and add great value to the project as well as the economy as a whole,” said Nabil Bourisli, CEO and president of Kuwait Petroleum International.
A world-class oil refinery
Duqm refinery will be a world-class oil refinery that uses advanced technology. It will manufacture clean, high-quality products in compliance with global standards for safety whilst striving to achieve the highest operational standards. The state-of-the-art Duqm refinery will bolster the energy industry of Oman by strengthening the supply and production of diesel, jet fuel, naphtha, LPG, sulphur and pet coke as its primary products.
About 900 hectares of site is prepared to construct the Duqm refinery. The scope of work includes three EPC packages. The first is the process unit of the refinery, whilst the second includes utilities and offsite facilities. EPC package three consists of the product storage and export terminal in Duqm, crude storage tanks in Ras Markaz and the 80km crude pipeline from Ras Markaz to the refinery complex.
Situated strategically in the South East of Al Wusta Governorate of the Sultanate of Oman, the project is positioned in a strategic maritime location. This gives the project a competitive advantage being in the path of international shipping lines in the Indian Ocean and the Arabian Sea, thereby easing the process of transport in and out of the region.
Duqm refinery is set to drive the growth of the Special Economic Zone Authority of Duqm (SEZAD) through development of new projects. Different ventures will be created from the refinery’s products as well as render diverse logistic services. The project will add substantial value to Duqm as a brand whilst introducing new industries to the area.
The EPC contacts
In February 2018, Tecnicas Reunidas of Spain signed the contract for the execution of the process units for the new refinery of Duqm. Tecnicas Reunidas received the letter of intent for the EPC contract award in August 2017. The contract was awarded on a lump sum turnkey basis to the international joint venture lead by Tecnicas Reunidas and Daewoo Engineering and Construction (South Korea) for an approximate value of $2.75bn and 47 months of duration. This is the largest of the three packages awarded for the refinery and includes all the process units.
The scope of the contract of Técnicas Reunidas includes the engineering, supply, construction and commissioning of the following refining units: crude distillation unit (230,000BPSD), vacuum distillation units (114,000BPSD), hydrocracker unit (74,000BPSD), delayed coker unit (52,000BPSD), kerosene treatment unit (40,500BPSD), diesel hydrodesulphurisation unit (83,500 BPSD), LPG treatment units (2 x 12,500BPSD), hydrogen production units (2 x 126,500Nm3/d), saturated gas unit (6,500mT/d), sour water stripper unit (2 x 44mT/d), amine regeneration unit (2 x 415mT/d) and sulphur recovery unit (3x355mT/d).
In September 2017, a consortium between CB&I and Saipem was awarded a contract worth approximately $750mn by DRPIC for EPC Package 3 for the Duqm refinery project. The consortium’s scope of work for Package 3 encompasses the engineering, procurement and construction of a product export terminal at Duqm Port, a crude tank farm at Ras Markaz and an 80km crude oil pipeline.
CB&I will be performing all of the EPC works for storage tanks at the export terminal and crude tank farm, while Saipem – the leader of Package 3 – will perform the balance of the works. CB&I’s portion of the contract is valued at approximately $140mn.
In August 2017, Petrofac, in a 50/50 joint venture with Samsung Engineering, has received notification of intent to award a contract worth approximately $2bn with DRPIC. Petrofac’s and Samsung’s scope of work includes engineering, procurement, construction, commissioning, training and start-up operations for all the utilities and offsites at Duqm.
In August 2017, Duqm refinery appointed Amec Foster Wheeler Engineering Consultancy as the project management contractor (PMC) for the refinery’s EPC phase. The award of the PMC contract to Amec Foster Wheeler was a follow up to the announcements of the issuance of conditional intention to award notifications to and in respect of three EPC contracts.
Amec Foster Wheeler’s scope of work includes PMC services to be delivered as part of an integrated project management team. Duqm refinery and Amec Foster Wheeler will jointly establish the integrated project management team consisting of Duqm refinery personnel and those of Amec Foster Wheeler to provide management, administration and supervision of Duqm refinery contracts related to the project.
The integrated project management team will monitor the EPC contractors’ performance and verify compliance with the EPC contracts, project specifications, project master schedule and project procedures in accordance with the standards set by the Duqm refinery and ensure that the EPC contractors perform all work and services to meet their obligations.
The Duqm project is amongst Oman’s most significant undertakings to date in the energy and petrochemical field, with the potential to serve as the springboard for Duqm’s planned transformation into one of the largest industrial and economic hubs in the region.