Samsung Heavy Industries wins USD 1.27 bil offshore facility deal

Samsung Heavy Industries wins USD 1.27 bil offshore facility deal. January. 06, 2017 07:12. by Min-Ji Jung jmj@donga.com. South Korea’s ship-building industry, which is being supplanted by China and Japan in terms of backlog of orders, has won its first offshore facility project this year. On Thursday, Samsung Heavy Industries announced that it won a 1.27 billion-dollar order for a floating production unit (FPU) for BP’s Mad Dog II project. The FPU will be transferred by August in 2020 for the second Mad Dog platform, which will be moored about 300 kilometers south of New Orleans, Louisiana.

This is the first offshore project that South Korean shipbuilders have won in one year and eight months. There were other contenders such as Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering, but it was Samsung that won the bid at the end. Samsung is also likely to win another offshore facility deal as it is the only company negotiating with ENI over a floating liquid natural gas (FLNG) platform project in Mozambique, which will be worth 2.52 billion dollars.

South Korean shipbuilders suffered a great deal of loss due to the falling oil prices since 2014, which led to order cancelations and transfer delays as well as down-pricing from overheated competition. In 2015, the country’s three biggest shipbuilders suffered an operating loss standing at a staggering 5.77 billion dollars. "Our company made a thorough inspection into a set of risks from the start such as production cost and form of contract, said an official from Samsung Heavy Industries.

The trend in oil prices will determine the fate of offshore facility construction projects. eBest Investment and Securities, a South Korean brokerage, projected that orders for offshore plants will increase if the international oil prices stay above 50 to 60 dollars a barrel. As the oil prices are showing signs of rallying lately, giants in energy industry such as Shell and Chevron announced their plan for new facility projects in 2018. Local experts, however, are concerned if South Korean shipbuilders will be able to survive the doldrums and keep their capacities and manpower intact until things start looking up.