A consortium of four Korean builders won an oil refinery project from Iraq, and thus the prospect of local builders to receive overseas construction orders worth as much as US$70 billion this year became more realistic.
According to sources in the construction industry on Feb. 19, four local builders consisting of Hyundai E&C, GS E&C, SK E&C, and Hyundai Engineering (HEC) received a US$6.04 billion (6.4 trillion won) order for oil refinery construction in Karbala, Iraq, which is the single largest industrial plant project won by local firms.
The order was placed by State Company for Oil Project (SCOP) and will be built in Karbala, some 120 kilometers southwest of Baghdad.
The construction is expected to take 54 months for a refinery that can process 140,000 barrels of crude oil per day into liquefied petroleum gas, gasoline, diesel, and other petroleum products.
“The project is noteworthy because companies carefully checked profit margins and overall business value before trying to win the bid,” a press release by Hyundai E&C said.
It said the tie-up between rivals to win the lucrative contract can set a precedent for similar arrangements in the future and prevent the kind of cut-throat competition cited as undermining the health of many local construction companies in the past.
This deal came on the heels of a clean fuels project (CFP) worth US$7.1 billion obtained by five local builders from Kuwait on Feb. 12. These two joint deals are considered to be a new model for overseas projects, in that local firms won contracts through cooperation amid growing worries over excessive competition between local builders in overseas construction markets.
Hyundai E&C and HEC hold a combined 37.5 percent stake (US$2.265 billion) in the order, with GS E&C at 37.5 percent (US$2.265 billion), and SK E&C at 25 percent (US$1.51 billion). The two Hyundai subsidiaries with a lot of experience in Iraq will be responsible for petroleum refinery facilities. GS E&C will be in charge of chemical equipment such as vacuum distillation units in petroleum refineries, while SK E&C will take charge of utilities.
Korean builders will draw the building plans, manage procurement and carry out the construction work. They will operate the plant for a year after completion before handing it over to SCOP.