Sept. 26 (Bloomberg) -- Hyundai Heavy Industries Co. said it won the largest-ever contract to build offshore oil production facilities, worth $1.6 billion, in the United Arab Emirates. The company's shares rose to a record.

A unit of Abu Dhabi National Oil Co. ordered the contract for completion by June 20, 2010 to replace existing facilities, Hyundai Heavy said in a statement today. The world's biggest shipyard now has $11 billion in new contracts this year, beating its $10.8 billion target.

Hyundai Heavy, Daewoo Shipbuilding & Marine Engineering Co. and other Asian yards are benefiting from increased investment in fuel production and transportation, as demand for oil increases worldwide. South Korean shipyards have a backlog of orders that will keep them busy for more than three years.

``There will be more demand for production and storage facilities to support the oil exploration projects'' that started before oil prices fell, said Chang Keun Ho, an analyst at Good Morning Shinhan Securities Co. in Seoul. He has a ``buy'' recommendation on Hyundai Heavy shares.

Oil prices, while easing from a record $78.40 a barrel on July 14, remain threefold higher since November 2001, making it profitable to develop fields at greater depths under the sea in the Middle East, Africa and U.S. Gulf. Oil-producing nations are increasing investment on offshore platforms as discoveries of large onshore fields dwindle. Oil traded at $61.33 in New York at 5:38 p.m. Seoul time.

Stock Gains

Hyundai Heavy shares closed 3.3 percent higher, at a record 126,000 won in Seoul. The stock has gained 64 percent, the second-best performer among the 50 top companies on the Korea stock exchange.

``We have established a bridgehead for future large projects in the Middle East,'' Hyundai Heavy said in the statement. The company is in talks for more offshore projects.

Hyundai Heavy will build three fixed platforms and sub-sea pipelines and bridges, comprising 40,000 metric tons, in Abu Dhabi for the Um Shaif project. Once completed, the facilities will produce 300,000 barrels of oil and 1 billion cubic feet of natural gas a day.

Hyundai Heavy turned to net income of 215.3 billion won ($228 million) in the first half, from a loss of 53.5 billion won a year earlier, as it charged more to build ships and steel costs fell. Sales rose 17 percent to 5.8 trillion won. Revenue from its offshore operations accounted for 12 percent of the total in the first six months.

Proven Reserves

Proven oil reserves last year rose 0.6 percent to 1.2 trillion barrels, while consumption gained 1.3 percent to 82.5 million barrels a day, according to data published by London- based BP Plc.

The boom in oil exploration is also benefiting other shipyards in Asia.

Keppel Corp., the world's biggest shallow-water oil-rig maker, said today it received a $385 million order to build a deepwater-drilling rig for Ensco International Inc., a U.S. oil and natural gas driller. Delivery will be made at the end of 2009. The Singapore-based company has S$10 billion ($6.3 billion) in backlog orders, which will help keep it busy until 2010.

SembCorp Marine Ltd., the world's second-largest maker of shallow-water oil rigs, secured a record S$4.2 billion of contracts in 2005, double the figure from a year earlier. The Singapore-based company's order book, which excludes ship-repair, stands at S$6 billion and is expected to grow, it said on Aug. 1.

Keppel and SembCorp Marine together won 80 percent of global orders for the so-called jacked-up rigs. Jack-up platforms, which can be raised or lowered on legs that stand on the seabed, are used in shallower waters.

Seoul-based Daewoo Shipbuilding last month won an order worth $1.3 billion to build a drilling and production platform for Chevron Corp.'s unit in Angola. The world's second-biggest shipbuilder has secured $3.72 billion in offshore projects this year, exceeding its target of $3 billion.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net.

Last Updated: September 26, 2006 05:13 EDT