HHI Capitalizes on Offshore Business

The name Hyundai Heavy Industries (HHI) usually comes up with a name tag of the worlds largest shipbuilder. But the Ulsan-based company is now dreaming of becoming more than just a shipbuilder, as they have found out that selling offshore oil drilling facilities and industrial plants can be lucrative businesses especially with the soaring oil price, according to a report in the Korea Times.

Earlier this month, the company won a $1.3-billion contract from Kuwait Oil Company in upgrading their crude oil export facilities by beating a consortium led by Spanish and Italian companies. It was the largest overseas construction deal won by a South Korea company this year, amounting more than 80 percent of the company’s total sales of such products last year.

Thanks to the high demand for oil drilling facilities as well as the increasing demand for liquefied natural gas vessels, HHI received $12.8-billion worth orders in the first eight months of this year. The total annual sales will easily exceed last year’s record of $13.4 billion, considering they have won many more orders since August including the Kuwaiti project.

Its offshore business division has led the better-than-expected sales of HHI. In the beginning of the year, Hyundai set their annual target of offshore unit sales, such as floating oil-drilling facilities, at $1.6 billion. But with more than two months left in this year, the company already surpassed the goal, receiving year-to-date orders of $2.23-billion.

This year’s major projects include a $280-million pipeline construction in Thailand, $700-million oil production facilities in Nigeria, $410-million oil and gas production unit in Congo and an onshore and an offshore platform project in Nigeria which is worth $620 million. With the successful conclusions of these contracts and rising demands for oil production facilities, Hyundai hope that they will have a chance to receive more orders in the remaining of this year.

“We are receiving more orders in the offshore and plant businesses, and the efficiency of our process is improving,’’ HHI’s president and CEO Yu Kwan-hong said in a recent meeting with directors from the company’s four divisions, according to the Korea Times Report. ``But we should not be satisfied here. We have to provide the best quality to the customers of the major offshore and plant projects, in order to win more orders from them. HHI’s involvement in offshore structures began in the late 1970s with an order for the open sea tanker terminal at Saudi Arabia’s Jubail harbor. Just like the way they have become a leading shipbuilder, the company raised their reputation in the global offshore facilities market through its quality, early delivery and price competitiveness.

The Jubail project was an epoch-making event, with their price of $931 million equivalent to about a quarter of South Korea’s national budget at the time. The most famous fairytale behind the project was that the massive concrete structures used on the harbor were fabricated in the company’s factory in Ulsan and then transported to Saudi Arabia by large barge vessels, an idea that dramatically short-end the construction term.

The initial success and subsequent experiences with about 100 offshore projects in the past 25 years enabled the company to grow into a leading contractor capable of handing nearly all types of on and offshore oil production facilities.

In recent years, it also earned worldwide recognition for its ability to build floating natural gas development facilities, by successfully building units for Brazilian and French companies.

HHI claims that its competitiveness comes from its 196-acre fabrication yard in Ulsan, which is the largest facility of its kind in the world. The yard has a giant crane, which can lift up 1,500 tons.

The company also is benefited from synergies through cooperation between different business divisions. In 2001, the company received an offshore platform order from ExxonMobil. While the hull and living quarters of the unit were manufactured in the company’s shipbuilding yard, the topside of the platform was assembled at the offshore business division, and the two parts were finally integrated on its offshore fabrication yard. The outlook for HHI’s offshore and plant business looks more bright. The growth of the offshore gas production facilities market is expected to accelerate in years to come because increasing demands for clean energy and soaring oil prices, which pushes the oil producers to shop for more production facilities.

Source: The Korea Times