Saturday, October 19, 2019
Korean Shipbuilders Revamping Offshore Plant Business Structure
Crucible Times
Korean Shipbuilders Revamping Offshore Plant Business Structure
  • By Jung Min-hee
  • December 30, 2015, 01:45
Share articles

The Okpo Shipyard in South Korea.
The Okpo Shipyard in South Korea.


According to Clarksons Research, the Okpo Shipyard of Daewoo Shipbuilding & Marine Engineering (DSME) and the Geoje Shipyard of Samsung Heavy Industries recorded order backlogs of 8.244 million CGT (126 ships) and 5.032 million CGT (90 ships) as of the end of last month, respectively, ranking first and second in the world.

The Ulsan Shipyard of Hyundai Heavy Industries fell one notch to third by recording 5.002 million CGT (104 ships), although Hyundai Heavy Industries had exceeded Samsung Heavy Industries by a margin of no less than 210,000 CGT at the end of October.

Fourth place went to Hyundai Samho Heavy Industries (3.924 million CGT, 92 ships), which was followed by Shanghai Waigaoqiao Shipbuilding (3.03 million CGT, 78 ships). Hyundai Mipo Dockyard fell from fifth to sixth by recording 2.846 million CGT and 127 ships. Shanghai Waigaoqiao Shipbuilding became the first Chinese shipbuilder joining the global top five.

Under the circumstances, Korean shipbuilders are regrouping themselves to clinch the large-scale projects postponed during the course of this year due to the low international oil prices. To this end, they are overhauling their bidding systems so that costs and profits can be calculated with a higher level of accuracy, and loss-making orders can be avoided.

Nevertheless, it is also said that adverse conditions will continue to linger in the entire industry including the offshore plant segment. Each of the three largest Korean shipbuilders currently has about 20 offshore plant construction contracts worth US$20 billion, which were won on a turn-key basis a couple of years ago with the total costs insufficiently calculated. Most of the plants are scheduled to be delivered from the second half of next year, and additional losses caused by unexpected variables could arise at any time.

Those contracts are said to be relatively vague when it comes to the responsibility for process delays. Besides, postponements and cancelations can happen at any time due to the recession in the industry. As just one example, the delivery date for the 650 billion won-worth drillship that the DSME has been building for two years has recently been put off from the end of this month to June 2018.

At present, oil majors such as Shell, Chevron and ENI are discussing the resumption of their postponed projects with the top three shipbuilders, and the total amount is estimated to be US$10 billion at the least. These projects include Shell’s US$4 billion FPSO project in Nigeria, ENI’s US$2 billion deal for FLNG construction in Mozambique, the Ubon Project of Chevron, and Petronas’ offshore gas field project in Malaysia. The oil majors stopped their negotiations for the deals earlier this year, with international oil prices plummeting. These days, however, they are looking to resume the projects, at least in part, on the determination that offshore plants can bring substantial profits in the long term.