China’s SEPCO set to win gas booster project for Saudi Aramco

China’s Shandong Electric Power Construction Corp (SEPCO) will likely win a contract to help expand the capacity of the main gas pipeline across Saudi Arabia, industry sources said.

Last year, SEPCO won the first phase of the master gas system (MGS) which is due to be completed by the end of 2016. It will boost the capacity of the MGS to 9.6 billion cubic feet of gas a day (cfd) from 8.4 billion cfd, state-owned oil company Saudi Aramco has said.

Under the new project called MGS 2, SEPCO will build a gas compressor station, industry sources said, increasing the capacity of the MGS to 12.5 billion cfd by 2018.

“Under the Out of Kingdom-In Kingdom basis, officially SEPCO is the lowest bidder,” said an industry source who declined to be identified.

Out of Kingdom-In Kingdom (OOK/IK) refers to the tendering process where an overseas firm pitches for the engineering and procurement on a project with the knowledge that construction will be carried out by the same company whose subsidiary is registered in the kingdom.

The source added that JGC Gulf, a subsidiary of Japan’s JGC Corp, had also submitted an alternative offer, although on a different basis.

In an emailed response to Reuters, Saudi Aramco said it did not comment on its business plans.

SEPCO could not be reached for comment while Japan’s JGC Corp declined to comment.

The MGS was built in the mid-1970s to gather and process associated gas from oil wells and use it for domestic industries.

There was no clear value for the contract but a second industry source said SEPCO’s price was below $700m while a third said it was little bit less than $800m.