Plant Exports Revived

The skyline of Biskra, in the northeastern region of Algeria, in which a Daewoo International consortium will build turn-key power stations.
The skyline of Biskra, in the northeastern region of Algeria, in which a Daewoo International consortium will build turn-key power stations.

 

Plants have revived as key export drivers. Three keywords are “Middle East,” “petroleum,” and “consortium.” Consortia of Korean builders supported by financial institutions have won many oil and gas plant orders in the Middle East.

The Ministry of Trade, Industry and Energy announced on July 14 that overseas plant order amounts during the first half of this year reached US$33.7 billion, a 20 percent increase from the same period last year (US$28 billion).

By region, orders from Africa, almost barren so far, grew the most. Orders from Africa during the first half of 2011 were only US$530 million, but this jumped to US$5.6 billion this year, growing more than ten times higher within three years. A consortium of Hyundai Engineering and Hyundai E&C made a contract of combined thermal power plant construction worth US$1.36 billion in Biskra and Jijel, Algeria, in February. A consortium of Daelim and GS E&C also won a contract for a US$610 million combined thermal power plant construction project in Kais, Algeria. Especially, the construction project in Biskra and Jijel is the biggest contract that Korean companies have won in Africa so far. Choi Gyu-jong, director of the shipbuilding and offshore plant division of the Ministry of Trade, Industry and Energy, explained, “Demand for plant construction is rapidly growing in Africa. More and more Korean companies are entering this emerging market.”

Performance in the Middle East, home ground for Korean companies, also improved, even with the geopolitical insecurities in Iraq. Orders within the Middle East grew more than three times to US$17.3 billion in the first half this year from US$5.5 billion a year ago. A consortium of Hyundai E&C, SK E&C, GS E&C, and Hyundai Engineering won a contract for refinery construction in Karbala, Iraq. A consortium of Korean construction companies won other construction deals in Kuwait as well.

Performance in Europe and Asia became worse, quite different from the Middle East and Africa. In Europe, the order amount sharply declined to US$72 million during the same period this year from US$8.86 billion in the previous year. In Asia, the order amount dropped more than 40 percent from US$9.6 billion to US$5.4 billion. Offshore and industrial plants are the main items in above areas, but the absolute number of new builds decreased, according to the Ministry of Trade, Industry and Energy.

Offshore plants accounted for 38.5 percent of the total orders last year, but this decreased to 8.1 percent this year. Industrial plants decreased to 4.5 percent from 11.8 percent as well. The economic recession in Europe and Asia is directly reflected in plant orders.

However, the plant market during the second half this year is expected to continue a growth trend thanks to major project orders from the Middle East and other emerging economies. The Middle Eastern crisis or Iraq problem, if elongated, could hurt the new order market, though. An official at the Ministry of Trade, Industry and Energy said, “We will actively try to attract new orders from the overseas market in order to reach US$70 billion this year. We will have Central and South America project road shows in this coming October as a part of our efforts.”

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