Italian Contractor Adds Large Middle East Offshore Award To Summer Run
An Italian energy services contractor has been awarded an offshore contract in the Middle East worth approximately 1.8 billion dollars for an undisclosed client, covering the engineering, procurement, construction and installation of offshore and subsea facilities. The award extends a run of contract wins the company has recorded through the summer.
Contracts of this type bundle together activities that were once tendered separately, and the bundling is the reason the values have grown so large. Under an integrated award the contractor takes responsibility for design, for procuring the pipe and the structures, for fabricating them and for installing them offshore, which transfers the risk of interfaces between those stages from the client to the contractor. Clients pay a premium for that transfer, and contractors accept it because it secures years of work for their fleets.
The vessels are the reason only a handful of companies can bid. Installing subsea facilities and pipelines requires pipelay vessels, heavy-lift crane ships and construction support tonnage that cost hundreds of millions of dollars each and are owned by perhaps five or six contractors worldwide. Award of a contract on this scale effectively books that equipment for a multi-year period, which is why the sequence of wins matters more to the company than the value of any single one.
Middle Eastern offshore activity has been running strongly through a period when investment in some other regions has been more hesitant, driven by national oil companies with long planning horizons and low production costs continuing to develop offshore gas and oil regardless of the price cycle. That counter-cyclical spending has become the foundation of the offshore contracting market, and the region's share of the global order book has risen accordingly.
The undisclosed client is unremarkable in this market and should not be read as unusual. National oil companies in the region routinely decline to be named in contractor announcements, and the practice reflects their preference for controlling disclosure of their own development programmes rather than anything about the contract. The value, the scope and the timing are all disclosed; only the customer is not, and the market generally knows who it is regardless.
