x Abu Dhabi, UAESaturday 22 July 2017

Koreans eye billions in Gulf deals

South Korea's biggest industrial contractors have set their sights on oil and gas business worth billions of dollars in the Gulf.

Hyundai Heavy Industries is known for shipbuilding, but it is now eyeing many industrial plant deals in Abu Dhabi and the region.
Hyundai Heavy Industries is known for shipbuilding, but it is now eyeing many industrial plant deals in Abu Dhabi and the region.

SEOUL // South Korea's biggest industrial contractors have set their sights on billions of dollars worth of oil and gas business in the Gulf this year, their executives say. Key contracts up for grabs include a natural gas project and chemical plant in Abu Dhabi and new refineries in Saudi Arabia. Contractors have been drawn to a flood of energy investment in the region as opportunities in East Asia and other areas decline, said HP Kong, the executive vice president and head of marketing at Samsung Engineering.

"The Middle East and North Africa is by far our major region, at the core of our business in terms of new orders," Mr Kong said. "The other areas like the Far East or Latin America or the African market, in terms of new project opportunity, it's not as fast as the Middle East." The Korean engineering and construction firms were awarded nearly all of Abu Dhabi's big energy deals last year, including a major offshore gas development, a refinery project and the country's first nuclear reactors. Excluded only 10 years ago from bidding on many projects for lack of experience, they have now also cemented a position in other markets across the Middle East, including Saudi Arabia.

Samsung Engineering landed US$8 billion (Dh29.38bn) worth of orders in the Middle East last year, which made up 85 per cent of the firm's new business, Mr Kong said. The firm's top markets were Abu Dhabi, Saudi Arabia and Algeria, he said. Mr Kong said he hoped to achieve a similar level of success this year and would submit offers to construct parts of the Shah sour gas development in Al Gharbia and a major new plastics plant at Ruwais owned by Borouge, which is partly owned by the Abu Dhabi National Oil Company.

"The results will definitely come out this year," he said. "In terms of contracts' value, it is big, it is huge." Samsung Engineering also submitted on Tuesday its bid for part of the Yanbu oil refinery in Saudi Arabia, he said, and was expecting to bid for a new contract for a refinery in Kuwait and a gas-processing plant in Qatar. Hyundai Heavy Industries, which has no direct tie to Hyundai Engineering and Construction, is targeting many of the same regional projects as Samsung Engineering after a more recent entrance in the Middle East market. The firm is better known as a major shipbuilder, but it has scored a number of multibillion-dollar deals for industrial plants in Abu Dhabi and across the region.

With its first major contract in Abu Dhabi to be completed by June, the company was receiving welcomes at many more oil companies across the region, said Dr Chang Sik-kim, the business manager for process plants at Hyundai Heavy. "We have to change, but we really appreciate that some clients in the Middle East are changing also," he said. "I think this is a trend that's happening to other contractors in Korea."

With each new contract, the Korean firms' experience grows and their appeal to regional oil companies increases as well, Mr Kong said. On their first projects in the region, both firms had to submit low bids that probably meant they lost money on the contract, a process executives referred to as paying their "tuition". With later contracts, the firms have charged enough to make a profit. Korean contractors have combined their quality construction with aggressive tactics to underbid rivals from Europe and Japan, Mr Kong said. The firms rely on long-term relationships with suppliers to obtain equipment at extremely low cost, he said.

"The situation has changed since five years ago, since the Koreans stepped into the market and the western companies feel that they cannot beat the Koreans in terms of competitiveness," he said. A number of European and Japanese firms were now shifting their focus to more difficult projects in which Korean firms cannot yet compete, he said. But Samsung Engineering, Mr Kong said, would expand as well.

"In order to meet our long-term objectives, oil and gas and petrochemicals is not good enough," he said. "Of course that's our main expertise. We will maintain or make it grow, but to reach our long-term plan we need to diversify our business activities." @Email:cstanton@thenational.ae