Korean Shipmakers Look to $20 Billion Brazil Deal

Brazilian state-run oil company Petrobras has revealed a plan to order 28 drill ships worth US$20 billion to a visiting Korean trade delegation. Meeting with representatives from Korea's four leading shipmakers in South Gyeongsang Province as well as the governor of the province, Kim Tae-ho, the oil giant said it wants to charter new offshore drilling rigs to be used for exploration in ultra-deep waters.
There has been speculation that the oil and gas group would soon unveil a massive project. This comes as good news to Korean shipbuilders, but they are cautious due to certain conditions Petrobras is putting forward.
Petrobras made clear that the government's "home production" policy of having the ships built in the country using Brazilian materials remains unaltered and will be applied to the new orders as well.
However, they said considering the situation of foreign shipbuilders the oil company will place orders in three packages, seven rigs in the first, two in the second and 19 in the last instead of single orders, gradually increasing the rate of home production to a maximum of 70 percent.
Petrobras expects delivery of completed units to begin in 2014 and end by 2017. This is a part of the Brazilian government's plan to boost the nation's shipbuilding industry as well as acquire rig building technology by funding the industry with more than $2 billion.
Experts speculate STX Shipbuilding, one of Korea's leading firms, will have an advantage as it owns a shipyard in Brazil, while Samsung Heavy Industries has a 10 percent stake in Brazil's Atlantico Sul Shipyard.
While many in the Korean shipbuilding industry welcome the announcement, some express concerns as they prefer the operation of domestic shipyards for higher profits and maintenance of employment.