Korean names eye $4.6 bn FPSO deal from Petrobas, offshore may add to shipbuilding boon

(Pulse) Korean shipyards enjoying a new heyday from revived commerce and oil activity have their hopes up for another windfall from offshore drilling facilities after years of inactivity.

Korea Shipbuilding & Offshore Engineering Co. (KSOE) and Daewoo Shipbuilding & Marine Engineering Co. (DSME) are said to be bidding for a $4.6 billion worth order from Brazil’s state-owned oil and gas company Petroleo Brasileiro S.A., better known as Petrobras, for two floating production storage and offloading (FPSO) vessels.

The deal is estimated at $4.6 billion would make the largest single FPSO order since 2013 when Samsung Heavy Industries was awarded with the 3.8-trillion-won ($3.4 billion) worth Egina FPSO deal. The last FPSO order worth over 1 trillion won a Korean shipbuilder brought home was a 1.1-trillion-won deal by Samsung Heavy Industries in 2019.

KSOE and DSME made it to the final round in the tender with competitive bidding prices in February according to sources. KSOE created a consortium with Singaporean state-owned shipyard Keppel Corporation and Brazil’s BrasFELS and DSME with Italy’s Saipem S.p.A. Samsung Heavy Industries is also known to have pitched in for the deal with Brazilian energy firm EBR but did not make it to the cut.

Given the hefty size, KSOE and DSME may share each order as it takes several years to build even one FPSO. Petrobras is expected to make the announcement in coming months.

The deal raises hope for revival in offshore drilling activity on rapid pickup in international oil prices. The U.S. West Texas Intermediate (WTI) crude that fell to as low as $10 to $20 per barrel during the Covid-19 pandemic has bounced back to $60.

Korean builders have revisited their peak period by netting 5.32 million compensated gross tonnage, more than half of the global orders, in the first quarter. The rush has pushed up the country’s vessel exports to $7.35 billion in the first three months, the highest since 2016 mostly on demand for high-valued super-big container and LNG carriers.

KOSE on Monday added two 300,000-ton crude oil carriers order from an European company to its bulging order book list. It had snatched 42 percent, or 11 out of 26 very-large crude oil carrier orders placed around the world so far this year.

Offshore plant usually in multi-billion dollars could bring back the renaissance in Korean shipbuilding after years of a slump that led to a massive streamlining including sale of DSME and government bailout.

Shares of DSME closed 2.46 percent higher at 29,100 won on Monday, and KSOE 2.19 percent up at 140,000 won.

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