LPIC is a transformational project that will improve Oman Oil & Orpic Group’s product mix and business model, increase its profit and support the development of a downstream plastics industry in Oman. Taking advantage of the growing global market for plastics, LPIC will create new business opportunities and employment in the sultanate, and firmly reinforce Oman Oil & Orpic Group as a significant player in the international petrochemicals marketplace as it will bring new business development opportunities for the country in the fast-growing plastics industry.
LPIC project’s physical hub centres on the existing Oman Oil & Orpic Group facility in the Suhar Industrial Port Area. Land within the zone had already been allocated to allow for LPIC and the recently completed Suhar Refinery Improvement Project (SRIP). The port zone and the businesses within it have contributed to the phenomenal growth in Suhar over the past 10 years, and LPIC will augment and encourage that trend.
In December 2015, Oman Oil & Orpic Group awarded a contract to a joint venture (JV) between CB&I and CTCI for the heart of the new petrochemical complex comprising the steam cracker and utilities for the LPIC project. On 10 May 2018, the combination of McDermott and CB&I brought together a global off shore and subsea engineering, procurement and construction (EPC) company with an established downstream provider of industry-leading petrochemical, refining, power, gasification and gas processing technologies and solutions, thereby creating an organisation that spans the entire value chain from concept to commissioning.
Currently, the combined firm – known as McDermott – has the integrated technology, engineering expertise, construction experience and global reach to design and build the energy infrastructure of the future.
According to Tareq Kawash, senior vice president for Europe, Africa, Russia and Caspian at McDermott, the LPIC project – a major onshore petrochemical project – was already in progress when the combination of CB&I and McDermott occurred. “I would say the combination has helped to provide some access to resources and capability within the MENA region. The project was reaching out to some legacy McDermott assets in Jebel Ali in Dubai for certain fabrication work. In general, the project had already made significant progress when the combination happened,” says Tareq.
“We have a joint venture between McDermott and CTCI and currently the project is about 85% complete in construction, while engineering and procurement are essentially complete, and we have just started commissioning activities. We have over 10,000 people on site in construction,” remarks Tareq.
Maximum value-added for Oman’s hydrocarbon molecule
The primary goal of LPIC is to further increase the value-added that can be derived from Omani crude oil and natural gas. The steam cracker plant will process light ends produced in Oman Oil & Orpic Group’s plants in Suhar as well as rich gas received from Fahud plant. Its concept lies in rerouting high-value elements of existing production streams, in combination with additional purchased feedstocks to deliver high-value polymer products for the local and international marketplaces. Once LPIC is commissioned, Oman Oil & Orpic Group’s revenue will grow further, and its profits will similarly increase.
Following commissioning, plastics production is forecasted to increase by more than one million tonnes, giving Oman Oil & Orpic Group a total of 1.4 million tonnes of polyethylene and polypropylene production by 2020. With the highly integrated complex in Suhar, including the refineries, aromatics plant, steam cracker and the downstream polypropylene and polyethylene plants, the operation will be one of the best integrated refinery and petrochemical facility combinations in the world, and will be able to achieve the maximum value-added for Oman’s hydrocarbon molecule.
With the global market for plastics growing, LPIC will firmly reinforce Oman Oil & Orpic Group as a recognised player in the international petrochemicals marketplace – enabling Oman, for the first time, to produce polyethylene, the form of plastic that rates highest in terms of global demand and increase the current production of polypropylene.
A world-scale project
LPIC is a steam cracker project, which will process light ends produced in Oman Oil & Orpic Group’s Suhar refinery and its aromatics plant as well as optimise natural gas liquids extracted from currently available natural gas supplies. Its concept lies in rerouting elements of existing production in combination with additional purchased feedstocks to deliver high-value polymer products for the local and international marketplaces. One of the first key milestones has already been passed with the agreement by Oman’s Ministry of Oil and Gas for the natural gas allocation for the project.
The project has four core components to it: (i) a natural gas extraction plant in Fahud; (ii) a 300km pipeline between Fahud and Suhar Industrial Port Area for gas transportation; (iii) an 800+kTA steam cracker unit; (iv) polymer plants (HDPE, LLDPE and a polypropylene plant).
“This project is a world-scale project. We are very proud to be involved in this – we were involved as McDermott earlier on this project. Our relationship with Oman Oil & Orpic Group goes back nearly 20 years. We are the licensor and front-end engineer not only for LPIC project, but also for the Suhar Refinery Improvement Project, which is a refinery upgrade,” comments Tareq.
“When the project was signed and kicked off in December 2015 as CB&I, McDermott was already involved in this much earlier. The process units for the project are licensed by Lummus Technology, which is owned by McDermott, and those technologies were signed a couple of years earlier. We did the front-end engineering design (FEED) for the complete LPIC project, which was completed in a year’s time. We have been involved in the LPIC project for over six years now,” explains Tareq.
“All EPC projects of this magnitude are challenging. The success of such ventures is determined in the early stages of the project in the way it is set up, in the way the organisation is designed, in the relationship with the client, and in the quality of the technical basis. The fact that we delivered our own technology, we did the FEED, and were able to execute the project means we were able to get off to a flying start when this EPC project was awarded,” claims Imre Csoti, vice president, onshore operations, MENA, McDermott.
“The team was already fully knowledgeable about what they had to do and I think that is really important in determining the success of the project. The central project management team was based initially in The Hague, which is where the FEED had also been done. We brought everybody together to manage the project. Then the project was transitioned to the site,” notes Imre.
“So, the secret of success is really in the beginning. We also had five operating centres involved in the project. It sounds very complicated but actually having five organisations that are able to deliver parts of the plant almost independently was a great benefit in terms of keeping the project on schedule,” adds Imre.
Spearheading in-country value initiatives
In terms of numbers, the construction phase of LPIC requires up to 13,000 Full Time Equivalents of which roughly 30% will be Omani. During the construction phase of the project, LPIC achieved more than $900mn spent within Oman related to local contents and development of small and medium enterprises (SMEs). It will also generate many opportunities for development of downstream conversion industry in Oman.
“About $900mn of the total project cost is allocated to support in-country value (ICV). The EPC works lasting for four years until the launch of the project in 2020 will lead to a great addition to the ICV platform across the Sultanate through the joint eff orts of the Oman Oil & Orpic Group’s ICV team and the key contractors of the four project packages,” comments Wim A Berendsen, senior vice president, and project director for LPIC EPC-1, McDermott.
“ICV is a very topical subject not only in Oman, but actually across the whole of the GCC and the Middle East. The Omanisation and ICV programmes related to the LPIC project were addressed from the very early stages of the bid, and building relationship with the client. We have a long history in Oman and deep understanding of what was required to really make a difference with ICV. I think it is one of the differentiators when we bid for a project; we understood the country and its requirements, and what ICV can do for the country,” points out Imre.
“The ICV programme offered and executed by us comprised not only commitments to meet the Omanisation targets, which is labour-related, but also hard targets in the areas of in-country spent – the amount of money we are actually putting into the economy there and the development of SMEs.”
“We achieved about $900mn local in-country spent on the project. Our activities there, together with our subcontractors, have benefited more than 600 SMEs. We are very proud of the achievements in the project. On the labour side, we exceeded the Omanisation percentages and we are employing about 280 Omanis in our JV organisation. That is about 37% of the staff. Our sub-contractors have also been fully enrolled in the programme. They have also achieved in excess of 30% target in Omanisation. So, it is not just at the top level but all the way down through the execution organisation,” declares Imre.
Oman Oil & Orpic Group supports ICV by reinforcing and developing businesses and taking human capabilities into consideration. This is achieved by reaching authenticated (Made in Oman) products and materials bought by the company and growing the human capital in all Oman Oil & Orpic Group projects by ensuring at least 30% Omanisation in the companies working for the project.
“The work of the ICV team revolves around a clear action plan to achieve its objectives, which include 30% Omanisation in the project, training 15% of Omani staff working in the contracting companies and supporting Omani companies, including SMEs and Omani suppliers through job opportunities available in the project by 25%. At the beginning of the project, a plan was agreed with the contractors in order to achieve the ICV objectives through Omanisation and training along with supporting the Omani products and companies,” elaborates Berendsen.
“Another area that we have put a lot of effort into is training programmes for young Omanis. We had three groups of graduates go through the training programme and we are training people in craft skills – piping and scaffolding. They have been put to work on the project after they have graduated from the training programme. We have trained more than hundred young Omanis on professional craft skills to start work and to generate a living,” observes Imre.
“At project start the project manager agreed a budget for the ICV programme to put direct investment into the community development and there have been a number of initiatives. In addition to that, our subcontractors also have been encouraged to do the same. The current count is probably 11 different projects that are in various stages of completion around the ICV programme, putting direct investment into the community,” asserts Imre.
Looking forward to successful commissioning and start-up
“The project progress is currently around 92% complete overall and the transition from construction to commissioning is well on its way. With a completion date of Q1-2020, we are well positioned to deliver the products as requested by Oman Oil & Orpic Group. Engineering is finished and all materials required for the project are delivered and construction is in full swing to support the commissioning and start-up team to achieve a smooth start-up in Q1-2020. A special programme for start-up readiness has been installed in order to make sure that the ‘build it clean’ concept is implemented, preventing any hick-ups in the start-up,” states Berendsen.
The project schedule is 48 month from start of EPC until Initial Acceptance. Initial Acceptance is scheduled in February 2020, which is the current schedule.
“A major achievement in this project is that we have completed 50 million man-hours recently without a lost-time injury. This is a fantastic safety performance by the project. We look forward to the successful commissioning and start-up of this facility in the first quarter of next year,” concludes Tareq.
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