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Shipbuilders vying for W4tr UAE project

Huge project involves construction of oil production system and gas-to-liquid plants on 4 artificial islands

Jan. 17, 2013 - 19:55 By Korea Herald
The nation’s top two shipbuilders ― Hyundai Heavy Industries and Daewoo Shipbuilding and Maritime Engineering ― are competing to win a $3.8 billion onshore oil facility construction project in the United Arab Emirates.

In a recent bid made to Zakum Development Co., a subsidiary of the UAE’s state-run petroleum corporation, DSME emerged as a strong candidate by offering the lowest price, shipbuilding sources said Wednesday.

DSME, in a consortium with U.K.-based Petrofac, entered a bid with a price of $3.79 billion, undercutting HHI by a slight margin, the sources said.

The huge project involves the construction of a 750,000-barrel-per-day oil production system and gas-to-liquid plants on four artificial islands in Zakum, an area located 84 kilometers northwest of Abu Dhabi.

This is to be DSME’s first multibillion onshore plant construction overseas, should the company end victorious in the tight race.

“The key point of the Zakum project is to build an oil production system, which is what we have been excelling at for years when it comes to ships and offshore facilities,” said a DSME official, dismissing concerns over the company’s lack of experience.

“The scale and location of the business may differ, but we believe ourselves to be competitive enough as a frontrunner in the ocean construction field.”

The project had originally been considered to favor HHI, when Zakum Development opened bidding last year, but was recently reoffered after price negotiations fell through.

“This may turn out to be an extra profit for us this year, as we had little expectations of winning over HHI,” said the DSME official.

HHI, the world’s biggest shipbuilder, nevertheless remained hopeful about its prospects.

“The tide may turn to our advantage at any time, as the bidding price gap was narrow and we are still reputed as the top onshore contractor,” said a HHI official.

While the two-way race is expected to heat up during the first quarter, concerns arose over the side effects of the rivalry between Korean firms in the overseas market.

“An excessive competition may, of course, lower the bidding price and cut down on the general profit level,” said an official of the International Contractors Association of Korea.

“However, such a contest is now only inevitable as Korean firms have long been sweeping the global market in shipbuilding and related businesses.”

Also, most of the corresponding companies have respectively developed a specialty field so that they may secure an independent market and survive amid the tightening race, he added.

“Onshore construction has so far been minor in our business sectors but actually involves a greater level of profit,” said the DSME official.

“In this sense, the Middle East is a market with great potential, in which we hope to make many advancements in the upcoming years.”

By Bae Hyun-jung (tellme@heraldcorp.com)