Daewoo Ship Offshore Orders to Surge on Energy Demand

Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipyard by orders, aims to almost triple contracts for offshore facilities this year as economic growth spurs energy demand. The company may win $5 billion worth of orders for drilling rigs and floating production facilities this year, compared with $1.8 billion last year, Executive Vice President Brendan Jeong said in an interview in Seoul on May 14.
“There will be a boom in demand for production facilities,” Jeong said. “As existing fields are depleted, the need to develop isolated ones is increasing.”
Hyundai Heavy Industries Co. and Samsung Heavy Industries Co. have also predicted a jump in offshore orders this year, undeterred by an oil-rig leak triggering a drilling ban in the Gulf of Mexico. Oil companies including Royal Dutch Shell Plc and Petroleo Brasileiro SA are still pushing ahead with projects near Australia and Brazil because global fuel demand is expected to rise as much as 18 percent during the next decade, according to Robert Fryklund, vice president of industry relations at energy-consultant IHS Inc.
Daewoo Shipbuilding may win an order worth about $1.6 billion to build a floating oil production and storage plant from Total SA of France, MoneyToday reported May 6, citing the company. A contract may be signed in the second quarter, it said. Jeong declined to comment.
Gas Development
Daewoo Shipbuilding is also planning to expand into developing gas fields because of rising demand for cleaner fuels, Jeong said. The company will provide services such as drilling and production in addition to building platforms, he said.
Global demand for liquefied natural gas will double by 2020, Guy Outen, Shell’s executive vice president for exploration and production, said on April 20.
“Rising concerns about quality of life is stoking demand for LNG,” Jeong said. “Carbon emissions can be reduced by using less coal and oil and replacing them with LNG.”
Daewoo Shipbuilding fell 4.2 percent to close at 18,450 won in Seoul trading after Korea Economic Daily said that Korea Development Bank had delayed plans to sell a controlling stake in the shipyard, citing Min Euoo Sung, the lender’s chief executive officer.
The bank will try to revive the sale by year end, the report said. Spokesmen at KDB and Daewoo Shipbuilding said they couldn’t immediately comment. Chosun Ilbo reported Posco may not bid for the company.
Transocean Rig
“Nothing has been decided,” Choi Doo Jin, a spokesman for Posco, South Korea’s largest steelmaker, said by phone today. Chosun’s report cited an unidentified official at the steelmaker.
Transocean Ltd.’s Deepwater Horizon drilling rig, leased to London-based BP Plc, exploded on April 20 and sank two days later, taking the lives of 11 crew members. BP yesterday said it had successfully created a mile-long funnel to capture some of the oil flow and pipe it to a ship on the surface.
The explosion may trigger stricter regulations and delay some development projects, Jeong said.
U.S. regulators imposed a halt in drilling in the Gulf of Mexico and coastal California following the explosion, delaying projects for companies including BP, Cobalt International Energy Inc., ConocoPhillips, Petrobras and Plains Exploration & Production Co.
Daewoo Shipbuilding’s net income rose 12 percent from a year ago to 107.7 billion won ($93 million) in the first quarter helped by lower steel costs, the shipyard said today in a regulatory filing. That was lower than an average estimate of 159.2 billion won from 20 analysts compiled by Bloomberg.
Operating profit, or sales minus the cost of goods sold and administrative expenses, gained 7.6 percent to 164.3 billion won in the first quarter. That widened margins to 6.1 percent from 5.2 percent a year earlier. Sales dropped 8 percent to 2.71 trillion won.