Daewoo Shipbuilding Expects 34% Surge in Offshore Orders
Daewoo Shipbuilding & Marine Engineering Co. (042660) expects to boost offshore equipment contracts 34 percent this year and is in talks for its first order for a floating liquefied natural gas plant.
The world’s third-biggest shipbuilder may win the FLNG order early as next month, Senior Executive Vice President Ryu Wan Soo said in an April 9 interview in Seoul, without elaboration. The shipyard said in a February filing that it was in talks to build a plant for Petroliam Nasional Bhd. (PET)
Daewoo may also get a separate FLNG contract around year- end, which isn’t included in its full-year order target, Ryu said, as energy companies buy gas equipment to meet surging Asian energy use. Investment in LNG and oil-drilling may help Daewoo win $8.5 billion of contracts for offshore products this year, equal to 77 percent of its companywide order target.
“There is going to be quite a lot of demand for offshore equipment,” said Hur Sung Duck, an analyst at HI Investment & Securities Co. in Seoul. “There should be more orders coming from the Middle East in the second half.”
Daewoo has already won $2.2 billion worth of offshore orders this year. The tally includes a $2 billion deal for a floating oil production and storage unit from Tokyo-based Inpex Corp. That was the shipbuilder’s largest contract since 2007. Offshore deals totaled $6.34 billion last year.
The company also expects an order for two semi-submersible oil-rigs as early as next month, Ryu said, without naming the customer. The shipbuilder is in talks with Limassol, Cyprus- based Songa Offshore SE on a potential order for two semi- submersibles, it said in a March 28 statement.
Daewoo rose 2.7 percent, the biggest gain in more than a week, to close at 28,800 won in Seoul. The stock has advanced 19 percent this year, compared with an 8.8 percent climb for South Korea’s benchmark Kospi index.
Demand for semi-submersibles, which are used in deep waters, is rising as energy companies explore new areas, including parts of the North Sea, Ryu said. Energy companies will probably order about 15 new rigs industrywide this year, of which the majority will be semi-submersibles, he said.
“Demand for offshore units is expected to grow for at least two to three years as oil companies plan to spend more on exploration and production,” Ryu said. “We should be able to achieve our order target for this year.”
Samsung Heavy Industries Co. (010140) won a $3 billion order from Royal Dutch Shell Plc for a 260,000-ton FLNG facility in May. The 488-meter long plant, to be used at the Prelude field off Australia, will cool gas into LNG so it can be moved by tanker.
“Demand will eventually gain speed,” Ryu said. “Still, the first few steps will take some time because this product is technologically unproven.”
Daewoo has also resumed talks on a possible tie-up with a shipyard in Brazil and it may make a decision on whether to pursue a deal by the middle of the year, Ryu said. He declined to name the Brazilian company.
Hyundai Heavy Industries Co. (009540), the world’s largest shipbuilder, Keppel Corp. and Sembcorp Marine Ltd. have already made investments in Brazil, where state-controlled Petroleo Brasileiro SA (PETR4) has a five-year plan to spend $224.7 billion. The company is developing the largest crude discovery in the Americas since Mexico’s Cantarell field in 1976.
“Brazil is a market that really can’t be ignored,” Ryu said. Singapore-based Keppel today announced a provisional agreement worth about $4.12 billion to build five rigs for Petrobras-backed Sete Brasil Participacoes SA.
Worldwide spending on deepwater exploration and production may total $232 billion in the five years through 2016, led by Latin America, according to Douglas-Westwood Ltd., an energy industry consultant.
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