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Optimism returns quickly in a yard where the
world’s largest shipbuilder constructs offshore
behemoths. Only months ago, industry pundits
fretted about what troubles might lie ahead for Hyundai
Heavy Industries (HHI) when they saw that new orders
for its FPSO (floating, production, storage and offloading)
and other offshore facilities plunged in 2003 following a
major contraction the year before. True enough, after peaking
at $2.1 billion in 2001, new contract volume tumbled to
$1.2 billion in 2002 and further to $670 million in 2003.
Helping to put such doubts to rest, however, executives
at the Offshore & Engineering Division
announced that two large orders won in the first two
months of 2004 are worth more than those they
meshed in all of 2003. “We are now close to clinching a
string of big contracts with majors like BP,
ExxonMobil, Chevron and TotalFinaElf,” says Cho
Kap-rae, executive vice president of the Offshore &
Engineering Division. “Almost certainly, our new
orders will exceed $2.0 billion this year.” Initially, the
division set its 2004 new order target at $1.3 billion.
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ONE STEP BACK, TWO STEPS FORWARD
The flurry of new orders leading up to the peak
year of 2001 overloaded the Offshore & Engineering
Division, as operations at the shipbuilding unit were
also severely stretched with three years worth of backlogged
contracts. Besides, the global economic slowdown
forced oil majors to postpone or shelve fresh
investments to expand expensive offshore oil and gas
development facilities in the past
two years. “Up until two years
ago, we had run almost breathlessly.
So we needed some rest to sort
out things,” Cho says. By now, the
Offshore & Engineering Division
looks refreshed and ready to roll
again, with a vision to explore
uncharted waters-deeper seabed and larger-scale oil
& gas exploration and development. The division
should be able to meet the challenges posed by such
ambitious tasks, flanked as it is by the world’s largest
shipyard and other heavy-industry units, such as the
heavy electrical engineering unit and the plant construction
unit. The Offshore & Engineering Division
alone has some 7,000 workers, about half of which are
highly skilled and around 500 dedicated solely to
design. “Our organizational prowess, our experience in
handling major projects and our capacities-particularly
synergies from the combination-are simply
beyond comparison,” notes Cho.
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BIG FISH COMING BACK
No wonder the oil majors are knocking
on HHI’s door again. The company’s
resolve to revive its offshore business is
well illustrated by a shakeup of the division’s
management. Coming into this year, the company
brought back Dr. Ahn Choong-seung, who initiated
HHI’s offshore engineering business about 30 years
ago and led its steady growth thereafter, to head up the
division. President Daniel (his English name), who
earned a reputation for consolidating the division’s
standing in the global offshore engineering community,
will aggressively promote sales and improve project
management in overseas markets.
The first good news this year came from Africa. BP
Angola gave HHI a $350 million order to build an
FPSO, which will be deployed by 2006 in BP’s Greater
Plutonio Fields located in Angola’s Deep Water Block
18 in Western Africa. The colossal buoyant structure,
deservedly called “Refinery Plant on the Sea,” is an offshore
facility that performs all the processes of oil production
from deep sea, refining and storage on the
gigantic vessel, to offloading the refined oil to a shuttle
tanker. HHI will fabricate the Plutonio FPSO’s hull,
which can store two million barrels of crude oil, topside
equipment capable of producing and refining
200,000 barrels per day, and living quarters to accommodate
100 crew members. The structure will weigh
80,000 tons and measure 310 x 58 x 32 meters. In addition
to the order from BP Angola, the Offshore &
Engineering Division is expected to conclude a $600
million contract from India’s state-owned Oil and
Natural Gas Corp. (ONGC) to build a submarine
pipeline. The Mumbai-Uran Trunk (MUT) Submarine
Pipeline Project will replace the existing MUT pipeline
system, which has supplied oil and gas from ONGC’s prestigious Mumbai High Field to the Uran Onshore
Terminal.
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KIZOMBA PROJECTS
It seems clear that similar deals with the world’s
top-ranked oil major, ExxonMobil, in recent years
served as a stepping stone for HHI’s winning the BP
Angola FPSO order. The Kizomba FPSO “B” Project
from ExxonMobil was the crown jewel among HHI’s
2002 new orders and a repeat order following Kizomba
“A” Project, for which HHI was picked as the main
contractor in 2001. The Kizomba “A” is currently sailing
out for offshore fields of Angola, while the
Kizomba “B” is being built at the Hyundai shipyard
and offshore fabrication yard. Another advantage of
the Offshore & Engineering Division is its ability to
carry out projects on a one-stop basis, that is, providing
e n g i n e e r i n g ,
procurement,
installation and
c o n s t r u c t i o n
(EPIC) as well as
test-runs in a
single package.
This enables
HHI to win
orders as a main
contractor rather
than a subcontractor.
The status
of main contractor
can raise
the stake of a
marine project
dramatically.
The two
K i z o m b a
orders were
received for
$800 million
each. The
FPSOs for
K i z o m b a
“A” and “B”
Projects will
constitute the largest single project ever won by the
division. This floating structure is composed of the hull
to store a total of 2.2 million barrels of crude oil, the
topside to produce and refine 250,000 barrels per day,
and living quarters to accommodate a crew of 100.
When completed, it will weigh about 81,000 tons and
measure 285 x 63 x 32 meters. Cho says FPSO and other
floating facilities will account for about 50% of the
Offshore & Engineering Division's operations, and
fixed facilities and pipeline installation for roughly
40%.
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BRIGHT FUTURE
The prospects for the offshore and engineering business
look bright because the fast-depleting resources
on land and in shallow seas are forcing oil companies to step up efforts to
locate offshore
reserves. In view of
ever-tightening environmental
rules,
demand for clean
energy, such as natural
gas, is expected to
continue surging.
HHI has steadily
accumulated technologies
and sophisticated
project management
know-how, relevant
to FPSO projects,
by successfully delivering
two FPSOs to
Petrobras of Brazil in
1999 and one to
TetalFinaElf of France
in 2001. The FPSO for
the French company, installed offshore of Girassol,
Angola, was achieved by dividing the work between
two business divisions. After the
lower hull was completed in the
dry dock of HHI’s Shipbuilding
Division and the topside part
was fabricated by the Offshore &
Engineering Division, they were
assembled at the offshore fabrication
yard.
HHI’s involvement in offshore structures began in
the late 1970s with an order for 89 jackets and deck
structures for the Open Sea Tanker Terminal (OSTT) at
Saudi Arabia’s Jubail Industrial Harbor Project. The
multiple projects for
the OSTT were an
epoch-making event,
with their price of
$931 million equivalent
to about a quarter
of Korea’s national
budget at the time.
Most notable about
the project was that
the jackets were fabricated
in Korea and
transported to Saudi
Arabia by barge, a
process that went
beyond conventional
wisdom. Transportation
of such large
structures in rough
seas was then considered
impossible.
Encouraged by that initial success, HHI has managed
to grow in the subsequent 30 years into a leading
turnkey contractor capable of all types of offshore facilities.
The writer is a journalist based in Seoul.
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