Monday, October 14, 2019
Shipbuilders Go Onshore While Constructors Go Offshore
Disruption of Plant Territory
Shipbuilders Go Onshore While Constructors Go Offshore
  • By matthew
  • August 8, 2013, 07:51
Share articles

 

In the plant industry, disruption of territory is becoming the norm. Shipbuilding and construction companies that are experiencing stagnation in existing businesses are expanding their business areas for further opportunities.

Korean shipbuilding companies are actively looking for business opportunities on land and construction companies are headed out to sea. Within the plant industry, competition for territory is intensifying.

According to industry reports released on August 7, shipbuilding companies that have traditionally focused on offshore plants are starting to strengthen their businesses by winning orders for onshore plants. This month, Hyundai Heavy Industries (HHI) has won a US$3.3 billion order from the Saudi Electricity Company (SEC) to build the Shuqaiq Steam Power Plant in Saudi Arabia as the sole EPC contractor. This is the largest single order since the HHI entered the plant business. HHI has seen steady increase in onshore plant orders. Total order amount more than doubled from US$2 billion in 2010 to US$4.1 billion last year. This year, HHI aims for US$6 billion and has already reached US$3.4 billion.

"HHI has internal engineering resources, which allows for flexible response to the client’s complex demands and design changes. This led to HHI’s recent performance in the onshore plant business,” said HHI personnel.

Daewoo Shipbuilding & Marine Engineering (DSME) has also won an US$800 million deal to build modules for an onshore crude oil production facility in UAE. This deal is part of a project to create four artificial islands and build oil production facilities on them. Under the deal, DSME will be responsible for the purchase, design, and construction of modules for the 22 production facilities such as the oil production system and gas-to-liquid plants.

“We will continue to develop our interests in the onshore construction business. We are especially interested in building crude oil and natural gas production facilities near the sea,” said DSME personnel.

Meanwhile, construction companies that traditionally performed well in onshore construction are moving out to sea. Some have made specific action plans such as selecting it as one of the future engines for growth and making relevant organization changes. Last April, Hyundai E&C won an offshore construction deal in the UAE, amounting to 2 trillion Korean won. This marked Hyundai E&C’s official expansion into the offshore plant business. 

“With increased competition and challenges by the late entrants in the onshore construction market, it is difficult to secure the appropriate level of profitability required. We are starting to turn our eyes to offshore plants,” said Hyundai E&C personnel. "In the case of fixed offshore plants, relevant modules are prepared on land and later constructed offshore.  Construction companies with relevant civil engineering experience have a head start,” he added.

GS E&C selected offshore construction as one of the 2020 Future Engine for Growth businesses. Last July, GS E&C integrated the sales and business departments to maximize synergy. Furthermore, relevant departments such as the Plant Business Department, Technology Department, and Integrated Design Department are cooperating to execute government tasks and internal simulation projects in preparation for a new market entry.

“Through strengthening the relevant organizations, we plan to strengthen our design and construction capabilities on offshore plants such as Floating Production Storage and Offloading (FPSO) and Floating Liquefied Natural Gas (FLNG),” said GS E&C personnel. “We are actively seeking to invest in a strategic alliance or M&A with offshore construction companies to compensate for our initial lack of relevant experience,” he added.

Samsung Engineering recently appointed Jungheum Park, an offshore plant expert, as the head of the company, and headed towards strengthening the business by establishing a joint offshore engineering company with UK-based AMEC.