Exclusive: $5.77B HD Hyundai-Aramco shipbuilding projects face delays

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Exclusive: $5.77B HD Hyundai-Aramco shipbuilding projects face delays

Published: 25 Mar. 2025, 06:00 Updated: 25 Mar. 2025, 16:37

LEE JAE-LIM
[email protected]

Audio report: written by reporters, read by AI

Third from left, Han Young-seuk, former vice chairman at HD Hyundai Heavy Industries, looks at the blueprint of the Makeen marine engine plant in Saudi Arabia at the groundbreaking ceremony with other Saudi officials in June 2023. [HD HYUNDAI]

HD Hyundai's $5.77 billion joint shipbuilding projects with Saudi Arabia's Aramco have faced delays in the Middle Eastern country, clouding the prospects of the Korean shipbuilder's ability to gain timely traction and profitability in the region.

The Makeen marine engine plant, originally slated for commercialization in the fourth quarter of 2025, has been pushed back — along with the completion of a shipyard that was expected to be finished last year but remains under construction.

“The delays are due to construction schedule setbacks by local contractors and material supply issues with the Saudi government,” a source with knowledge of the matter told the Korea JoongAng Daily.

The two projects are part of what would become the world’s largest maritime industrial zone, spanning 4.96 million square meters (53.4 million square feet) in Ras Al-Khair, Saudi Arabia. Known as the King Salman Global Maritime Industries Complex, it is master-planned by the Saudi government in an ambitious attempt to turn the site into an all-in-one maritime hub for shipbuilding, ship repair, offshore rig fabrication and marine engine manufacturing.

Saudi Engines Manufacturing, also known as Makeen, is a marine engine plant joint venture backed by Saudi oil supplier Aramco, Riyadh-based investment firm Dussur and HD Korea Shipbuilding & Offshore Engineering (KSOE), with investments totaling $570 million.

It was initially set to begin commercial operations in the fourth quarter of 2025. However, the timeline has now been delayed to next year. As of February, construction was 46 percent completed, according to the source.

A blueprint of the Makeen marine engine plant in Saudi Arabia [HD HYUNDAI]

Aramco has a 55 percent stake, followed by HD KSOE with 30 percent and Dussur with 15 percent.

Construction broke ground on June 2023.

The factory was “nearly 40 percent completed” as of September 2024 and is expected to begin operations in early 2026, according to Bader Al Zaabi, CEO of Saudi Engines Manufacturing, in a statement to Saudi media outlet Argaam.

It is the first engine licensing deal under which HD Hyundai will receive royalties from overseas to manufacture its proprietary HiMSEN dual fuel engines at the facility, which will have a maximum annual capacity of 30 large marine engines, 235 mid-sized engines and 160 marine pumps.

Engine supply will go to global shipbuilders, including International Maritime Industries (IMI), a joint shipyard venture of Aramco, state-run shipping carrier Bahri, United Arab Emirates-based energy company Lamprell and HD Hyundai Heavy Industries, with total investment surpassing $5.2 billion.

IMI is the first overseas project secured by Chung Ki-sun, the current HD Hyundai executive vice chairman and grandson of the shipbuilder’s founder, stemming from a memorandum of understanding between the involved companies in November 2015. Chung was then a senior vice president of HD HHI in strategy and financial planning.

Aramco holds the majority share with a 40 percent stake, followed by Lamprell, Bahri and HD KSOE with 20 percent stake respectively.

The shipyard is the main anchor project within the complex but construction has run into multiple delays. Spanning eight years, ground was broken in November 2016 and was initially to be completed in 2021.

Subsequent reports followed with adjustments to this timeline, with the latest time frame targeting the end of 2024.

Upon completion, the shipyard is to reach a maximum production capacity of 43 commercial vessels annually and offer ship repair services while manufacturing more than 260 types of ship- and marine-related products.

The situation highlights a key risk Korean companies face in partnerships with Middle Eastern firms — while the large-scale projects offer significantly lucrative opportunities, delays and unpredictability prove to be pitfalls.

However, the IMI shipyard has been partially operational since 2019, and its primary shareholders such as Bahri pledged billions of dollars worth of very large crude carriers (VLCC) orders. As of June 2024, IMI had secured commitments totaling $10 billion.

Whether HD Hyundai is profiting from partial operations of the shipyard was not confirmed.

HD Hyundai declined to comment about the matter.

Correction, March 25: An earlier version of this article did not include the latest update of the project scale and misstated the stakeholders of related projects.

BY LEE JAE-LIM [[email protected]]