Daewoo Shipbuilding to land major Iran deal

Daewoo Shipbuilding & Marine Engineering (DSME) is close to inking a 1.3 trillion won ($1.1 billion) offshore plant construction deal with an Iranian oil company, which will come as a breath of fresh air after over a year-long drought in the offshore plant business.

The shipbuilder confirmed last Friday that the “deal is in progress,” through an inquired disclosure by the Korea Exchange that demanded the company verify the deal. The name of the Iranian company, however, is not to be publicly announced until after finalization of the deal.

According to industry sources, the shipbuilder will be constructing five jackup rigs for the state-run Iranian company. A jackup rig is a buoyant, mobile offshore oil rig.

The company’s latest big contract was a $2.7 billion oil field expansion project from the Kazakh oil company Tengizchevroil in November 2014.

As the global offshore plant market comes to a halt, the nation’s shipbuilders have made efforts to secure this deal. Samsung Heavy Industries, for instance, negotiated with the Iranian partner for over a year. But DSME, which jumped into the bidding roughly two months ago, won the deal.

“As far as I know, domestic shipbuilders have been negotiating the price of the jackup rig at 300 billion won each,” an industry insider said. Chinese competitors are known to offer a single jackup rig of similar spec at around 250 billion each.

When this round of deals is finalized, DSME is due to become the first local shipbuilder to sign a deal with an Iranian company after the country’s economic sanctions were lifted in January. Iran has been pointed to as a newly rising market for the nation’s troubled shipbuilders.

The country has recently proposed goals to invest a total of $185 billion in crude oil and gas-related businesses by pursuing 50 projects, according to a report released by the Korea International Trade Association, which means construction and repair work for the country’s basic infrastructure will soon be in demand.

BY MOON HEE-CHUL, KIM JEE-HEE [kim.jeehee@joongang.co.kr]