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JV to build US$5.2 billion Saudi yard

Written by  Wednesday, 31 May 2017 07:57

Saudi Aramco and partners have proposed to build the US$5.2 billion King Salman International Complex for Maritime Industries & Services, a maritime complex in Saudi Arabia that will be one of the largest yards in the Arabian Gulf.

Signing in the front row from left to right: HHI's Jong Chul Kim, Lamprell CEO Christopher McDonald, Aramco's Ziad Murshed, Bahri Acting CEO Ali Al Harbi. Image from Aramco.

Earlier today (31 May) Saudi Aramco signed a shareholder agreement with Lamprell, the national shipping company of Saudi Arabia (Bahri), and Hyundai Heavy Industries (HHI) to enter into a partnership to establish, develop, and operate the proposed maritime yard, in the Ras Al-Khair, near the Jubail Industrial City on the Kingdom’s east coast.

"The integrated maritime yard will be the largest in the region in terms of production capacity and scale, providing an unprecedented mix of products and services in the region and enabling Saudi Aramco and its supply chain partners to meet their manufacturing, maintenance, repair and overhaul requirements for offshore oil and gas rigs, offshore support vessels, and commercial vessels, including very large crude carriers (VLCC)," says Saudi Aramco. "The new facility will have the capacity to manufacture four offshore rigs, over 40 vessels including three VLCCs, and service over 260 maritime products annually."

Major production operations are expected to commence in 2019 with the facility reaching its full production capacity by 2022.

The yard, expected to be about 4.3sq km, will extend along the coast of Ras Al-Khair, and consist of four main production zones, Zones A-D.

Lamprell says it will provide certain services and technical support at yard, serving as the technical partner for Zones A and D, being the zones that will provide maintenance, repair and overhaul (MRO) services for jackup drilling rigs and commercial vessels, and the construction of jackup drilling rigs, respectively.

HHI will be the technical partner for Zones B and C, being the zones that will construct and undertake MRO services for offshore support vessels and that will construct commercial vessels, respectively, according to Lamprell.

Saudi Aramco's parent company, Saudi Arabian Oil Co., will enter into a master offtake agreement with the JV under which it will agree to purchase, or procure the purchase, from the JV of a minimum of 20 jackup drilling rigs (equating to two rigs per year for 10 years based on the prevailing and competitive market prices), as well as offshore support vessels and MRO services for jackup drilling rigs and offshore support vessels operating on Saudi Arabian Oil Co.’s offshore assets, subject to certain conditions, says Lamprell.

Bahri will enter an offtake agreement with the JV under which Bahri will agree to purchase from the JV not less than 75% of its commercial vessel requirements over 10 years, being a minimum of 52 commercial vessels (including a significant number of VLCCs), and MRO services for such vessels based on the prevailing and competitive market prices, subject to certain conditions, according to Lamprell.

The government of Saudi Arabia will fund $3.5 billion of the $5.2 billion for the project. The JV will pick up the remaining $1.7 billion.

“We are excited to announce this transformational transaction which will not only make Lamprell a participant in potentially one of the largest yards in the Arabian Gulf but also provide access to the most important market in the industry and one of the largest players in the sector,” says Lamprell chief executive Christopher McDonald. “Participation in the Maritime Yard also secures access to one of a limited number of companies globally that we believe will be receiving orders for and building new jackup drilling rigs in the near-to-medium term with significant component parts of the first two jackup drilling rigs expected to be subcontracted to Lamprell.”

“This strategic partnership among industry leading companies is positioned to capitalize on the rapidly-growing maritime requirements in the region by offering globally competitive, safe, high quality and on-time solutions to customers,” says Saudi Aramco. “The new JV localizes essential links of Saudi Aramco’s supply chain related to offshore drilling and shipping activities, which will lead to optimized cost, reduced response times and improved agility for Saudi Aramco and its affiliates.”

The JV inked a memorandum of understanding in January 2016 for the maritime complex.

Read more:

Saudi Aramco, Lamprell, HHI, Bahri, ink shipyard MOU

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