Study On Overseas EPC Petrochemical Project Purchase Management

Founded in 1976,Saudi Basic Industries Corporation(SABIC)is one of the world's leading petrochemical companies.It is also one of the world's largest exporters of fertilizers,polymers and chemicals.It is playing a leading role in the engineering plastic industry.SABIC is No.247 on the The Fortune 2016 Global 500,just following BASF,DOW Chemical Company and CHEMCHINA.Its revenues approached $40billion in 2016.Thanks to the Belt and Road Initiative pursued by Chinese government,an increasing number of Chinese engineering companies have been winning EPC bids from SABIC in petrochemical projects.The oil price has been remaining low over the past years,forcing Saudi Arabia,the largest oil producer in the Middle East,to curtail various expenses.The government has canceled development projects in the amount of1 trillion riyals(RMB1.8 trillion).SABIC currently focuses its investment on capacity expansion for petrochemical plants.These debottlenecking projects are characterized by low contract value(the maximal is below $300 million,and most of the contracts are valued below $100 million),acute bidding competition(among International engineering companies),tight schedule,difficulties in management and large financial risks.Each bidder should seriously consider how to defeat other competitors so as to win the bid and finally meet the profit target.As an integral part in project management,procurement management is playing an important role in linking designing and construction together.Given that 55%-70%of the total contract amounts are used for material procurement,if the procurement management adopted by Chinese engineering companies met stringent EPC requirements of the global petrochemical projects,they are very likely to make breakthroughs in the projects.I participated in SABIC's improvement work for EPC in petrochemical projects that was satisfactorily completed.In this paper,the author studies the improvement work,and conducts comparison and analysis on the procurement process by making use of procurement management procedures.Through comparison and analysis,the author finds out problems in the procurement management and also figures out solutions that could be applied to the subsequent petrochemical projects.The solutions have scientifically and effectively improved Company M's procurement management for EPC in its overseas petrochemical projects.The study is conductive to improving China's research on procurement procedures in relation to EPC in the overseas petrochemical projects.The study is able to facilitate the scientific management and standard operation in overseas EPC projects by Chinese engineering companies,the procurement in SABIC's EPC projects in particular.Chinese engineering companies engaged in SABIC EPC projects could draw upon experience mentioned in the paper.