Kuwait Construction
Korean construction firms are expected to win four out of five packages of the New Refinery Project (NRP) in Al Zour, Kuwait, which is the largest overseas construction project this year. From a total cost of US$14 billion (16.39 trillion won), four packages are worth US$12.8 billion (14.98 trillion won).
Earlier, the Kuwaiti government divided the project into five packages by construction type and placed the orders for Package Five in Jan. this year and Package One to Three in March.
According to industry sources on July 29, Hanwha Engineering & Construction (E&C) will receive a letter of award (LOA) for Package One worth US$4.6 to $4.8 billion (5.38 to 5.62 trillion won) from the Kuwait National Petroleum Company (KNPC) soon. The package has been practically won by a TR consortium of Hanwha E&C, Spain’s Tecnicas Reunidas, and China’s Sinopec. Packages Two, Three, and Five will also be won by Korean companies.
Since Korean builders already suggested the lowest prices in the previous biddings for the NRP project in Kuwait, they were highly likely to receive the orders. Among five packages, the consortium of Hyundai Engineering & Construction (E&C), SK Engineering & Construction and Italy’s Saipem suggested the lowest price for Package Five, while the TR consortium did so for Package One. Also, the Daewoo Engineering & Construction (E&C) consortium consisting of Daewoo E&C, Hyundai E&C and the U.S.’ Fluor Cooperation participated in the tender with the lowest price for Packages Two and Three. Accordingly, Korean construction firms were expected to monopolize the NRP project.
However, an unexpected challenge came up. Since their bidding prices were US$3 to $4 billion (3.51 to 4.68 trillion won) higher than the Kuwaiti government’s budget, the government delayed the decision for more than four months. As the Kuwaiti government has recently approved an additional budget for the NRP project, however, Korean builders are highly likely to obtain the packages again.
The NRP project is a mega construction project worth more than US$14 billion (16.39 trillion won) and the estimated stake of Korean companies amounts to US$6.2 billion (7.26 trillion won). Therefore, it will be good news in the Middle Eastern construction market, where there are not many ongoing projects due to the low oil price shock.
The total construction costs for the packages, in which Korean construction firms take part, will reach US$12.8 billion (14.98 trillion won): US$4.6 to $4.8 billion (5.38 to 5.62 trillion won) for Package One, US$3 billion (3.51 trillion won) for Package Two, US$3.5 billion (4.1 trillion won) for Package Three, and US$1.5 billion (1.76 trillion won) for Package Five. Although Korean builders’ exact share will be set after negotiations, industry watchers say that it will be around US$6.2 billion (7.26 trillion won).
It is said that the consortium of Italy’s Saipem and India’s Essar has won Package Four, worth US$1.5 to $1.6 billion (1.76 to 1.87 trillion won), which carried out a re-tender on July 7 after the consortium failed to obtain the order due to the prices.
According to data from the International Contractors Association of Korea, the total overseas construction order amount stood at US$25.76 billion (30.15 trillion won) as of July. The amount in the Middle East amounted to only US$6.98 billion (8.17 trillion won), which is as low as 27 percent of the total.