Petrofac snares $4bn Kuwait deal

To say it's been a struggle for the oil services industry recently is an understatement. Adapting to falling oil prices without knowing exactly how its customers - oil E&P firms - will react only makes things harder. Capital has predictably flown out of the sector and investors can be forgiven for thinking work is scarce, but a Petrofac-led consortium has won a $4 billion (£2.6 billion) heavy oil project in Kuwait, and the bombed-out shares have rallied by as much as 6% on Tuesday.

Petrofac will be working with Greece-based Consolidated Contractors Company on the five-year project, covering both greenfield - building new operational facilities - and brownfield - using buildings for different activities - facilities. The scope of work will cover engineering, pre-commissioning, construction and maintenance for the main central processing facility, infrastructure and production support complex.

"This includes a pipeline of almost 162 kms which will transport the heavy crude from the CPF to South Tank Farm located in Ahmadi," said Petrofac "from where KOC has the option to send it to the proposed Al-Zour refinery in the south of Kuwait."

The engineering, procurement and construction should last 52 months, when it will be handed over to Kuwait Oil Company. When fully operational, the initial phase should produce 60,000 barrels of oil per day.

Industry expert Malcolm Graham Wood is confident of Petrofac's visibility for the year ahead: "For PFC there is still lots of good news on the backlog front which bodes well for the future, in the present ahead of upcoming figures there are some operational issues to sort out and probably an impairment charge into the bargain."

And, as we reported last week, the oil services industry still has its fans, and remains a lure for investors with time on their side. 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.