Technical Strength or Low Cost?
Whether Daewoo Shipbuilding & Marine Engineering (DSME) attains new order receipt goal for this year or not is likely to hinge on the Rosebank Project, a US$2 billion offshore plant construction project.
The floating production storage and offloading (FPSO) construction project has been launched by Chevron Corporation, and DSME and Singapore-based Sembcorp Marine are currently competing for it. The final winner will be determined late next month. The project, worth US$2 billion in total, is to develop an offshore oil field approximately 175 km away from the Shetland Islands in the North Sea.
The competition is likely to be between the technical strength of DSME and the Singaporean company’s low labor costs. The latter’s labor costs are about 10% lower than those of the former, but DSME’s technical strength and experience are regarded as being above those of Sembcorp Marine.
Early this year, DSME set the goal of winning new shipbuilding orders worth US$7.3 billion for this year. The company has achieved 48% of the goal so far.
The result of the competition is likely to affect the company’s restructuring as well. “According to our self-help plan, restructuring should be carried out within this year,” DSME president Jung Sung-leep said in June, adding, “Details will be disclosed at the end of the third quarter in view of factors such as business goal fulfillment.”