Project update: Oman's Liwa Plastics Industries Complex with McDermott
Inside the project management and $900m ICV plans of the Oman Oil and Orpic Group project, which is 85% complete
Liwa Plastics Industries Complex (LPIC) is a transformational development that will improve Oman Oil and Orpic Group’s product mix and business model, increase their profit, and support the development of a downstream plastics industry in Oman.
Taking advantage of the growing global market for plastics, LPIC will create new business opportunities and employment in the sultanate, and firmly reinforce Oman Oil and Orpic Group as significant players in the international petrochemicals marketplace, bringing new business development opportunities for the country in the fast-growing plastics industry.
Currently, the project is about 85% complete in construction, while engineering and procurement are essentially complete, and we have just started commissioning activities.
LPIC project’s physical hub centres on the existing Oman Oil and Orpic Group facility in the Sohar Industrial Port Area. Land within the zone had already been allocated to allow for LPIC's development, and the recently completed Sohar Refinery Improvement Project.
In December 2015, Oman Oil and Orpic Group awarded a contract to a joint venture (JV) between CB&I and CTCI for the heart of the new petrochemical complex, comprising the steam cracker and utilities for the LPIC project.
On 10 May, 2018, the combination of McDermott and CB&I brought together the American offshore and subsea engineering, procurement and construction (EPC) company and an established downstream provider of petrochemical, refining, power, gasification, and gas processing technologies, resulting in an organisation that spans the entire value chain, from concept to commissioning.
Currently, the combined firm – operating as McDermott – has the integrated technology, engineering expertise, construction experience, and global reach to design and build future energy infrastructure, such as Oman's LPIC.
According to Tareq Kawash, senior vice president for Europe, Africa, Russia, and Caspian at McDermott, the LPIC project – a major onshore petrochemical scheme – was already in progress when the combination of CB&I and McDermott took place.
“I would say the combination has helped to provide some access to resources and capability within the Mena region," he tells Construction Week's sister title Refining & Petrochemicals Middle East.
"The project was reaching out to some legacy McDermott assets in Jebel Ali in Dubai for certain fabrication work. In general, the project had already made significant progress when the combination happened.
“We have a joint venture between McDermott and CTCI, and currently, the project is about 85% complete in construction, while engineering and procurement are essentially complete, and we have just started commissioning activities. We have over 10,000 people on site in construction,” remarks Kawash.
Wim A Berendsen, senior vice president at McDermott and project director for LPIC EPC-1, says progress on the project has reached 92%, and that the transition from construction to commissioning was well under way.
He adds: “With a completion date of Q1 2020, we are well-positioned to deliver the products as requested by Oman Oil and Orpic Group.
"Engineering is finished, all materials required for the project are delivered, and construction is in full swing to support the commissioning and start-up team to achieve a smooth start-up in Q1 2020.
"A special programme for start-up readiness has been installed in order to make sure that the ‘build it clean’ concept is implemented, preventing any hiccups in the start-up,” states Berendsen.
The project schedule spans 48 months from start of EPC until initial acceptance, which is scheduled for February 2020.
“A major achievement in this project is that we have completed 50 million man-hours recently without a lost-time injury," Kawash says.
"This is a fantastic safety performance by the project. We look forward to the successful commissioning and start-up of this facility in the first quarter of next year.”
WHAT IS LPIC?
The primary goal of LPIC is to further increase the added value that can be derived from Omani crude oil and natural gas.
The steam cracker plant will process light-end goods produced at Oman Oil and Orpic Group’s plants in Sohar, as well as rich gas received from Fahud plant.
Its concept lies in rerouting high-value elements of existing production streams, in combination with additional purchased feedstocks to deliver high-value polymer products for the local and international marketplaces.
Once LPIC is commissioned, Oman Oil and Orpic Group’s revenue will grow further, and its profits will similarly increase.
Engineering is finished, all materials required for the project are delivered, and construction is in full swing to support the commissioning and start-up team to achieve a smooth start-up in Q1 2020.
Following commissioning, plastics production is forecasted to increase by more than one million tonnes, giving Oman Oil and Orpic Group a total of 1.4 million tonnes of polyethylene and polypropylene production by 2020.
With the highly integrated complex in Sohar, including the refineries, aromatics plant, steam cracker, and the downstream polypropylene and polyethylene plants, the operation will be one of the foremost integrated refinery and petrochemical facility combinations in the world, and will be able to achieve the maximum added-value for Oman’s hydrocarbon molecule.
With the global market for plastics growing, LPIC will allow Oman, for the first time, to produce polyethylene, a form of plastic that rates highest in terms of global demand and increase the current production of polypropylene.
We did the front-end engineering design (Feed) for the complete LPIC project, which was completed in a year’s time. We have been involved in the LPIC project for over six years now.
One of the first key milestones for LPIC has already been passed with the agreement by Oman’s Ministry of Oil and Gas for the natural gas allocation for the project.
LPIC has four core components, including a natural gas extraction plant in Fahud, a 300km pipeline between Fahud and Sohar Industrial Port Area for gas transportation, an 800+ kTA steam cracker unit, and polymer plants, such as a high- and linear low-density polyethylene plant each, plus a polypropylene facility.
INTELLIGENT PROJECT MANAGEMENT
“This is a world-scale project, and we are very proud to be involved in this – we were involved as McDermott earlier [as well]," Kawash explains.
"Our relationship with Oman Oil and Orpic Group goes back nearly 20 years. We are the licensor and front-end engineer not only for LPIC project, but also for the Sohar Refinery Improvement Project, which is a refinery upgrade.
“By the time the project was signed and kicked off in December 2015 as CB&I, McDermott was already involved in this much earlier.
"The process units for the project are licensed by Lummus Technology, which is owned by McDermott, and those technologies were signed a couple of years earlier.
"We did the front-end engineering design (Feed) for the complete LPIC project, which was completed in a year’s time. We have been involved in the LPIC project for over six years now.”
Imre Csoti, vice president of onshore operations in the Mena at McDermott, explains how intelligent project management can contribute to the improved engineering of megaprojects of LPIC's scale: “All EPC projects of this magnitude are challenging.
"The success of such ventures is determined in the early stages of the project in the way it is set up, in the way the organisation is designed, in the relationship with the client, and in the quality of the technical basis.
The secret of success is really in the beginning. We also had five operating centres involved in the project, and while it sounds very complicated but actually having five organisations that are able to deliver parts of the plant almost independently was a great benefit in terms of keeping the project on schedule.
"The fact that we delivered our own technology, we did the Feed, and were able to execute the project means we were able to get off to a flying start when this EPC project was awarded.
“The team was already fully knowledgeable about what they had to do and I think that is really important in determining the success of the project.
"The central project management team was based initially in The Hague, which is where the Feed works had also been done. We brought everybody together to manage the project, and it was then transitioned to the site,” Csoti adds.
“So, the secret of success is really in the beginning. We also had five operating centres involved in the project, and while it sounds very complicated but actually having five organisations that are able to deliver parts of the plant almost independently was a great benefit in terms of keeping the project on schedule.”
OMANISATION AND ICV AT LPIC
In terms of numbers, the construction phase of LPIC requires up to 13,000 full time equivalents, of which roughly 30% will be Omani.
During the construction phase of the project, LPIC saw more than $900m (OMR346.5m) spent within Oman related to local content and development of small and medium enterprises (SMEs).
Another area that we have put a lot of effort into is training programmes for young Omanis. We had three groups of graduates go through the training programme and we are training people in craft skills – piping and scaffolding.
Berendsen explains: “About $900m of the total project cost is allocated to support in-country value (ICV).
"The EPC works, lasting for four years until the launch of the project in 2020, will lead to a great addition to the ICV platform across the sultanate through the joint eff orts of Oman Oil and Orpic Group’s ICV team, and the key contractors of the four project package."
Csoti says ICV and Omanisation requirements were accounted for by project teams from the early stages of LPIC's development.
He adds: “The Omanisation and ICV programmes related to the LPIC project were addressed from the very early stages of the bid, and building relationships with the client. We have a long history in Oman and deep understanding of what was required to really make a difference with ICV. I think it is one of the differentiators when we bid for a project; we understood the country and its requirements, and what ICV can do for the country.
“The ICV programme offered and executed by us comprised not only commitments to meet the Omanisation targets, which is labour-related, but also hard targets in the areas of in-country spent – the amount of money we are actually putting into the economy there and the development of SMEs.”
“Our activities, together with our subcontractors, have benefited more than 600 SMEs. We are very proud of the achievements in the project.
"On the labour side, we exceeded the Omanisation percentages and we are employing about 280 Omanis in our JV organisation. That is about 37% of the staff. Our sub-contractors have also been fully enrolled in the programme. They have also achieved in excess of 30% target in Omanisation. So, it is not just at the top level but all the way down through the execution organisation,” Csoti says.
Oman Oil and Orpic Group support ICV by reinforcing and developing businesses and taking human capabilities into consideration. This is achieved by employing authenticated 'Made in Oman' products and materials, and growing the human capital in all Oman Oil and Orpic Group projects by ensuring at least 30% Omanisation in the companies working for the project.
Berendsen says the project team also focused on training 15% of Omani staff working within LPIC's contracting outfits, as well as working with SMEs and Omani suppliers by involving them in 25% of work opportunities available on the project.
Csoti elaborates: “Another area that we have put a lot of effort into is training programmes for young Omanis. We had three groups of graduates go through the training programme and we are training people in craft skills – piping and scaffolding.
"They have been put to work on the project after they have graduated from the training programme. We have trained more than hundred young Omanis on professional craft skills to start work and to generate a living.
Our sub-contractors have also been fully enrolled in the programme. They have also achieved in excess of 30% target in Omanisation. So, it is not just at the top level but all the way down through the execution organisation.
“At the start, the project manager agreed a budget for the ICV programme to put direct investment into the community development, and there have been a number of initiatives in this direction.
"In addition to that, our subcontractors also have been encouraged to do the same. The current count is probably 11 different projects that are in various stages of completion around the ICV programme, putting direct investment into the community,” Csoti adds.