Daewoo Shipbuilding to Construct Jackup Rigs to Challenge Keppel
Daewoo Shipbuilding & Marine Engineering Co. (042660), the world’s second-largest shipbuilder, is bidding to build jackup rigs for the first time in three decades to tap more orders from offshore oil discoveries.
Demand for bigger, more sophisticated rigs that can work under harsher conditions is increasing in the North Sea and other regions, Lee Jae Ha, chief marketing officer at the Seoul- based company, said in an interview. Each unit could be worth as much as $600 million, he said.
Oil discoveries, including in the North Sea, have boosted spending by companies for exploration and production. Daewoo is making a comeback since its last delivery in 1983 into a segment that has been dominated by Keppel Corp. (KEP) and Sembcorp Marine Ltd. (SMM)
“We expect demand for these high-specification heavy-duty rigs to increase this year,” Lee said on March 12. “We have a lot of experience building complex drilling units and that will give us a competitive edge over the Singapore yards.”
Keppel and Sembcorp Marine have a combined 70 percent share of the global market for jackup rigs, which are used in shallow waters with extendable legs that allow them to stand on the ocean floor.
Statoil ASA (STL), which accounts for about 80 percent of Norway’s oil and gas output, said in February that it will use a floating storage unit and a jackup rig for the first four to five years for its Mariner project.
Daewoo fell 1.8 percent to 29,550 won in Seoul yesterday. The stock has climbed 8.8 percent this year, compared with a 0.1 percent gain in the benchmark Kospi index.
The shipbuilder also expects more demand for other offshore products this year as economic growth and depleting reserves in existing fields increase the need to develop new wells in deeper and harsher areas.
Daewoo has $2.7 billion of orders this year, both from Statoil, for two fixed platforms. It also won a similar contract from the Norwegian company in December.
The shipbuilder is targeting $13 billion of new contracts this year, with almost 70 percent for offshore products.
“Daewoo Shipbuilding is trying to widen the scope of offshore products,” said Lee Jae Won, an analyst at Tong Yang Securities Inc. in Seoul, who recommends investors buy the stock. “They wouldn’t go into this if they think they will lose money. They’re moving into the high-end of the jackup market, not the low end.”
The company may get an order with its partner for a $4 billion onshore oil production plant in the Middle East, Lee said, without elaborating. The winner will be selected before the end of May, he said.
Daewoo is the world’s second-biggest shipbuilder by orders, according to Clarkson Plc (CKN), the world’s biggest shipbroker.
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