Offshore plants, the main cause of the shipbuilding industry’s prolonged recession, are making a comeback. Demand for offshore plants is changing from oil to eco-friendly energy such as offshore wind power and liquefied natural gas (LNG). It is expected to become a new growth driver for Korean shipbuilders.
As demand for oil exploration and drilling has decreased, orders for related facilities have virtually stopped according to industry sources on Dec. 12. There are occasional orders for floating production, storage and offloading (FPSO) units to be installed in offshore oil fields that have already been explored, but there are no orders for drilling equipment such as drill ships. Offshore wind installations or LNG exploration and production equipment are filling the void.
Offshore plants are high-margin vessels with one unit costing up to one trillion won. Depending on market conditions, they become malleable inventory. The Korean shipbuilding industry, which has previously suffered from poor sales, plans to focus on eco-friendly offshore plants, as they are expected to continue to grow in demand. This is why the Korean shipbuilding industry is eyeing the offshore wind power market.
Floating offshore wind turbines have the advantage of being able to be installed in deeper and farther waters than fixed offshore wind turbines, which are limited to a depth of 50 to 60 meters. The former’s production cost per unit is twice that of the latter at around 10 billion won, but they are unlikely to become malignant inventory like drill ships. Floating offshore wind turbines are less likely to invite complaints for noise generation and reduced fish catches from residents and fishermen so they can be built on a larger scale than wind turbines on land and offshore. This fact makes floating offshore wind turbines more profitable.
Orders for ships for offshore wind power projects are also being placed. Unprecedented ship orders like a big offshore wind turbine installation vessel (WTIV) ordered from Hanwha Ocean last year are also expected. Although China and Japan have also entered the offshore wind power market, the Korean shipbuilding industry, which has accumulated expertise through various offshore projects, has established a strategy to continue its market leadership by actively participating in the offshore wind power market for strengthening global maritime environmental regulations, RE100 and reducing carbon footprints.
In 2021, HD Hyundai completed the joint development of a 10 MW Korean-type floating offshore wind model with five global vessel classification societies, including Korea Register of Shipping, and is participating in offshore wind farm construction projects in Jeju and Ulsan. It supplies HIMSEN Engine, an eco-friendly engine of its own development, and selective catalytic reduction (SCR) devices to offshore turbine installation vessels (WTIVs), which are essential to offshore wind power construction.
With orders for four WTIVs as strong momentum, Hanwha Ocean will expand its offshore eco-friendly value chain. It will build offshore power generation, conversion, and transmission facilities and produce and transport hydrogen and ammonia through electric power generated there. It will also challenge the seawater desalination and offshore small reactor module markets. Recently, the company applied for the trademark “WindHive” for its floating offshore wind power business.
Samsung Heavy Industries has successfully developed its own WTIV and large offshore floating wind power unit in 2021 by making the most of its experience of having delivered three units to date.