ULSAN ― The offshore yard in Ulsan run by Hyundai Heavy Industries, the nation’s top shipbuilder, is a surprisingly interesting place to explore.

The focus on offshore plants makes for a much more diverse range of construction than at conventional shipyards, and increased orders in recent years have the place buzzing.

According to HHI, as of June, seven different offshore plants are being built in the world’s largest offshore yard, which covers 215 acres. Those include modules for the Barrow Island LNG plant construction project run by Chevron Australia, better known as the Gorgon Project, and a cylindrical floating production, storage and offloading, or FPSO, unit for the Goliat offshore oil production project in Norway. 

“The company’s offshore business division performance was better than expected this year. It has already met 88 percent of yearly order target of $6 billion in the first half of this year,” Son Chang-hyun, a vice president from the offshore and engineering division of HHI, told The Korea Herald.

As of June, the number of offshore plant projects that HHI is carrying out rose to 17. If drillship and semi-submersible drilling rig orders, which are included in shipbuilding performance at HHI, are combined, offshore plant orders have increased to $6.05 billion in the first half of this year, set to soon match its $6.75 billion in shipbuilding orders.

“We expect that the offshore plant market continues to be bullish as plant operators, most of whom are global oil and gas giants like BP, Shell and Chevron, continue to launch offshore plant construction projects to explore sea oil fields amid rising global oil and gas demand and falling onshore oil and gas reserves,” Son said.

“In addition, with global oil and gas companies going into deeper waters for oil exploration, the offshore division is preparing to enter the high-value-added subsea market for a new growth engine.”

According to the INTSOK annual market report, the subsea market, including subsea equipment and services, is forecast to reach $50 billion in 2014, more than double from $23 billion in 2011.

Tasks ahead to raise profitability

The shipbuilding industry, one of the nation’s six major industries, has been squeezed by the prolonged global economic downturn and rising competition from emerging markets like China. In response, the Ministry of Trade, Industry and Energy released a policy report on the development of the offshore plant industry in May this year as part of efforts to lift the local shipbuilding industry.

According to the report, the ministry will put a policy focus on cultivating engineers and localizing materials and equipment used for constructing an offshore plant.

Korean shipbuilders show off their world-class offshore plant construction capability, but lag behind frontrunners in engineering capability needed for plant design and in localization of materials and equipment used for plant construction, the report noted. Only 20 percent of materials and equipment for offshore plant construction are currently localized. These structural issues push the offshore plant sector to remain a low-margin business.

Son from HHI, who has experience in both the offshore and onshore plant businesses, however, remains positive in his outlook for the nation’s offshore plant industry.

“Conservative oil and gas project operators, once preferred to control the entire processes of a project, start outsourcing more processes, including plant design, to Korean builders based on track records and long-term partnership,” Son from HHI said.

He added that the company has continued to invest in its offshore business division for the past few years. HHI established an offshore plant in Onsan, near Ulsan, last year in a bid to enhance production capability in the segment. The plant produces more than 50,000 tons of large offshore-plant modules a year.

In addition, the company opened an offshore engineering center in Seoul to attract talent in the capital city.

By Seo Jee-yeon  (jyseo@heraldcorp.com)