Hyundai Heavy to Win 79% More Oil, Gas Orders in 2010

Hyundai Heavy Industries Co. expects to win at least 79 percent more oil and gas equipment orders this year as the world’s biggest shipyard reduces its dependency on shipbuilding. “There is a chance we could exceed our order target” of about $4.2 billion, Kang Chang June, executive vice president of Hyundai Heavy’s offshore and engineering division, said in an interview at the company’s Ulsan, South Korea headquarters yesterday. Net income from the division is expected to be similar to last year’s figure of 300 billion won ($265 million) to 400 billion won, he said.
Hyundai Heavy has already achieved more than half its 2010 offshore order target as oil companies such as Royal Dutch Shell Plc, BP Plc and Petroleo Brasileiro SA boost investment in drilling and floating production equipment to support wider exploration. The Korean company is targeting oil and gas as overcapacity and Chinese competition sap ship orders.
“Offshore is definitely the business to be in,” said Kim Hyun, an analyst at LIG Investment & Securities Co. in Seoul. “Demand is going to increase because production at existing wells is declining and fuel demand is growing.”
Hyundai Heavy is bidding or preparing to bid for projects in areas including the North Sea and the Gulf of Mexico, Kang said. Brazil has also become a focus for rigmakers as state- controlled Petrobras plans to order 58 drilling rigs, mainly from local yards, through 2018. The company is developing the Tupi field, which may hold as much as 8 million barrels of oil.
Brazil Venture
Hyundai Heavy has agreed to acquire a 10 percent stake in EBX Brasil SA’s shipyard unit to target contracts from Petrobras, which plans to spend $174.4 billion in the five years through 2013 to help tap offshore fields. The shipbuilder may eventually increase this holding, Kang said.
“Brazil has the natural resources and we expect orders to come through but it will take some time,” he said. “That’s why we don’t have plans to build a production facility there.”
Sembcorp Marine Ltd., the world’s second-biggest maker of shallow-water oil rigs, said last month it plans to open a new yard in Brazil. Samsung Heavy Industries Co., the world’s second-largest shipyard, in June 2008 bought a 10 percent stake in Estaleiro Atlantico Sul.
Hyundai Heavy climbed 2 percent in Seoul trading to 232,500 won, the highest close in almost 10 months. The stock has advanced 23 percent in the past year, compared with a 45 percent climb for South Korea’s Kospi index.
The shipyard aims to win a total of $17.7 billion worth of contracts this year, an increase of 65 percent from 2009. It posted a net income of 2.15 trillion won last year, 4.9 percent less than a year earlier.
Eni Order
The company last month won a $1.2 billion order to build a floating production, storage and offloading vessel for Eni SpA, Italy’s biggest oil and gas company. The yard will also build a gas platform and pipelines valued at $1.4 billion for Daewoo International Corp. in Myanmar.
Investments in floating production facilities are expected to reach as much as $9 billion annually until 2013, according to Hyundai Heavy.
Shell, vying with BP as Europe’s biggest oil company, said yesterday that it plans to spend more than $100 billion by 2014 to revive production growth. The company is assessing more than 35 projects that may add 8 billion barrels of oil equivalent resources. Oil traded above $82 in New York today.
Hyundai Heavy is also aiming to build more onshore gas and chemical plants, where it is using block-building systems used to make ships to lower production costs. The plant equipment is made in pieces in Ulsan and then shipped to the construction site, rather than being fully built on-site.
“This will help reduce costs for Hyundai Heavy and let us complete projects before the contract period,” Kang said.
The system is being used for a $1 billion gas plant being built for Abu Dhabi Gas Liquefaction Co. on Das island in the Persian Gulf emirate. Construction is due to be completed by September 2013.