Petrofac, the international oil & gas facilities service provider, and China Petroleum Engineering & Construction Corporation (CPECC), the engineering and construction subsidiary of China National Petroleum Company (CNPC), have established a new strategic joint venture, China Petroleum Petrofac Engineering Services (CPPES). Based in Sharjah, UAE, the joint venture will provide project management and engineering services for selected oil & gas projects, focusing on projects for Chinese oil & gas companies.

Petrofac and CPECC have a long-standing relationship and track record of cooperation, most recently being jointly awarded an inspection, maintenance and repair contract for the Rumaila oil field in Southern Iraq. The strengthened relationship was recognised at an official ceremony that took place at CPECC’s offices in Beijing on 19 September.

The joint venture which is 51% owned by CPECC and 49% owned by Petrofac, following formal signing and exchanging of contracts, will be established under the leadership of personnel from both companies.

Maroun Semaan, group chief operating officer, Petrofac, commented:

“Cementing our association with CPECC represents a significant milestone for Petrofac. Our relationship with CPECC extends over the last seven years and I am delighted it has been strengthened with the creation of this joint venture. Together, we have considerable resources and world-class engineering and construction expertise and our collaboration should enable us to capitalise on the significant opportunities in China and internationally.“

Mr Hou Haojie, President, CPECC, commented:

“It is a delight that CPECC and Petrofac have come together to combine and harness their respective talents in order to deepen the portfolio in our local and international markets.“

In its interim results for the first half of 2011, oil services company Petrofac gave the following update on its operations at Shell’s Majnoon oilfield:

“In March 2011, we announced the award of our first contract in Iraq, a US$240 million engineering, procurement and construction management project with Shell. The Majnoon field in southern Iraq is one of Iraq’s largest developments and we are delighted to be working with Shell to assist them with unlocking the field’s potential.

“We are providing engineering, procurement, fabrication and construction management services for the development of a new early production system comprising two trains each with capacity for 50,000 barrels of oil per day, along with upgrading of existing brownfield facilities.

“Work on the project began in mid-2010 and is expected to complete during the fourth quarter of 2012.”

(Source: Petrofac)

Update, RBC Capital Markets opinion: albeit the size of the contract is not material compared to Petrofac’s backlog, we believe that any positive developments from Iraq should be seen as a positive step for Petrofac. This region becomes increasingly strategic, especially for the newly created Integrated Energy Services (IES). This contract award follows the EPC for the early production facility of the Shell-operated Majnoon field ($240m in March) demonstrating PFC’s ability to build a presence in the country.

Petrofac, the international oil & gas facilities service provider, announces that BP Iraq NV (BP) has awarded Petrofac and its joint venture partner, China Petroleum Engineering & Construction Corporation (CPECC), an inspection, maintenance and repair contract worth US$90 million for the Rumaila oil field in Southern Iraq.

Petrofac’s Offshore Engineering & Operations (OE&O) business will lead the one-year contract, which is effective from 28 June 2011, and is worth US$63 million to the group. Work will commence following a short transition and the scope of the contract covers rotating machinery, degassing stations and cluster stations. The project is being undertaken in partnership with CPECC, a company which has well established operations and infrastructure in Iraq. As part of the agreement Petrofac’s staff will be based at CPECC’s accommodation facilities in Rumaila.

Commenting on the award, Petrofac’s group chief operating officer, Maroun Semaan, said: “We continue to be focused on our ongoing activities in Iraq and this most recent contract win demonstrates our strategic intent to grow the breadth and depth of our service delivery within the country. It also provides an excellent opportunity for us to establish closer relations with the BP Iraq team and to continue to develop our own in-country knowledge and presence.”

Bill Dunnett, managing director, Petrofac OE&O added:

“We’re delighted to be able to continue to support our existing customer, BP, in its onshore operations and to build on our relationship which started in the UK North Sea and developed more recently when we took over the operatorship of the Sajaa asset in Sharjah earlier this year. This contract will be run from our operating centre in Sharjah and we hope it will further establish our capability both in the country and the region to maximise any future opportunities.“

The Rumaila oil field, discovered by BP in 1953, is located in Southern Iraq, 32km from the country’s border with Kuwait.

Petrofac, the international oil & gas facilities service provider, has confirmed it has been awarded a contract in excess of US$240 million by Shell Iraq Petroleum Development B.V. for developments in the Majnoon Field, Southern Iraq.

Under the competitively tendered contract, Petrofac is providing engineering, procurement, fabrication and construction management services for the development of a new early production system comprising two trains each with capacity for 50,000 barrels of oil per day, along with upgrading of existing brownfield facilities. Work on the project began in mid-2010 and is expected to complete during the fourth quarter of 2012.

Ayman Asfari, Petrofac group chief executive, said:

“Majnoon is one of Iraq’s largest developments and we are delighted to be working with Shell to assist them with unlocking the field’s potential. Iraq’s geographic location, adjacent to many of our existing areas of operation, made it a natural market for the group as we continue to broaden our geographic footprint.“

Subramanian Sarma, managing director, Petrofac Engineering & Construction adds:

“Prior to beginning work with Shell in Iraq last year, we had spent many months preparing in order to achieve a sufficient level of readiness across several aspects of our business operations. All of our activities are underpinned by our strong commitment to safety, quality and integrity and alongside Shell and the local community, we are working to deliver this project to the standards our customers and stakeholders expect from us.“

PetroChina has invited seven contractors to submit the bidding documents for engineering, procurement and construction work on the first phase of development at the Halfaya oilfield in Iraq in the first week of 2011, the Norway-based energy newspaper Upstream has reported.

The report said the companies invited to participate in the tender include the UK-listed Petrofac, France’s Technip, CH2M Hill of the U.S., China Petroleum Engineering Construction Company (CPECC), Daqing Engineering & Construction of China, and Malaysia’s KNM and Malaysia Marine & Heavy Engineering.

According to the report, CPECC could have an upper hand over other bidders thanks to its status as PetroChina’s sister company under the umbrella of China National Petroleum Corporation (CNPC).

Under the development and production service contract signed with Missan Oil Company in January of 2010, a PetroChina-led consortium aims to kick off production of 70,000 barrels per day from Halfaya in its first phase of commercial production.

PetroChina has a 37.5 percent stake in Halfaya, with 25 percent hel d by Iraqi’s South Oil Company, 18.75 percent by Malaysia’s Petronas and another 18.75 by French giant Total.

(Source: istock Analyst)

Following our recent reporting of Petrofac’s (LSE: PFC) new business in Iraq’s Majnoon oilfield, the company issued its half-year results this morning (Monday).

While the only reference to Iraqi business in the results was the following statement:

“In Iraq, we have commenced early stage engineering work for an International Oil Company which is expected to lead to a larger contract award during the second half of the year“;

finance director Keith Roberts later told reporters:

“Iraq is going to be an enormous market for companies like us. There are estimates that the total spend on fields in Iraq could be as much as $200 billion (£129 billion) over the 10 years.

“We’re now doing work for a major international oil company and are confident that it will turn into a fully approved contract.

“For us, being in there early, and getting a foot on the ground as well as experience of operating in Iraq positions us well for getting a piece of that very significant business.”

Petrofac shares closed the day up 3.5% at 1410p.

(Sources: Petrofac, London Evening Standard)

More details are coming to light regarding Petrofac’s new contract in Iraq, about which we reported last week.

Dow Jones reports that the two crude-oil processing plants will be at Iraq’s super giant Majnoon oil field, which is run by Iraq’s state-run South Oil Co., Royal Dutch Shell PLC (RDSA) and Malaysia’s state-run Petronas, and that the project is expected to take 18 months.

There was reportedly no comment from a Petrofac official based in Sharjah.

Update, 23rd August:

In Petrofac’s half-year results, published this morning, the only reference to Iraqi business was the following statement:

“In Iraq, we have commenced early stage engineering work for an International Oil Company which is expected to lead to a larger contract award during the second half of the year.“

Petrofac (LSE: PFC) has won a contract to build two new crude oil processing plants with a capacity of 50,000 barrels per day each, and to rehabilitate an existing crude oil plant, an official at Iraq’s Oil Ministry has reported to Reuters.

(Source: Reuters)

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