S.Korean HD Hyundai inks $3.9 bn Qatar LNG tanker deal

DOHA -- HD Hyundai Heavy Industries Co., the world’s second-largest shipyard, has won a $3.9 billion deal to build 17 liquified natural gas carriers for Qatar, the largest single contract in the South Korean shipbuilding industry.

South Korean President Yoon Suk Yeol and Qatar Emir Sheikh Tamim bin Hamad Al Thani on Wednesday announced the deal between HD Hyundai and state-owned QatarEnergy after their summit in Doha.

“HD Hyundai has secured work for a half year with the deal,” said Choi Sang-mok, senior presidential secretary for economic affairs. “Hanwha Ocean and Samsung Heavy Industries are in talks on prices for an additional 30 tankers, which are expected to bring us even greater fruits soon.”

HD Hyundai, Hanwha Ocean Co. and Samsung, the top three shipbuilders in South Korea, have been predicted to sign deals this year worth as much as $9.4 billion to manufacture LNG carriers for the country in the Middle East.

Yoon and Tamim agreed to escalate the two nations’ relationship to a comprehensive strategic partnership. The leaders expanded their sectors of cooperation to encompass stable LNG procurement, LNG tanker operation and maintenance, as well as agricultural technology and defense.

The two governments and companies in the countries signed 12 deals and memorandums of understanding totaling $4.6 billion -- including HD Hyundai’s contract -- for smart farms, solar power, self-driving cars, cultural content, and the medical and financial sectors.

Yoon secured a total of $15.6 billion in investments and orders during his state visit to Saudi Arabia earlier this month. Mohammed bin Salman, the kingdom’s crown prince and prime minister, clinched $30 billion in bilateral deals with South Korea last November.

The United Arab Emirates pledged to invest $30 billion in the Northeast Asian country across strategic sectors such as the nuclear power, defense, hydrogen and energy businesses during a summit in January between Yoon and UAE President Mohammed bin Zayed Al-Nayhan in Abu Dhabi.

JACKPOT FROM QATAR

Qatar in 2008 unveiled a long-term goal to reduce its dependence on oil by 2030 and diversify its economic structure. As a part of Qatar National Vision 2030, the country aims to increase its LNG production capacity to 126 million tons a year by 2027 from the current 77 million tons through the North Field expansion project, which will require more vessels.

QatarEnergy ordered 65 LNG carriers last year, of which South Korean shipbuilders won deals for 54 vessels and Chinese companies took the rest.

The state-owned company formerly known as Qatar Petroleum has been placing more orders this year for tankers, including the 17 ships won by HD Hyundai. The number will swell further with the 30 vessels targeted by Hanwha and Samsung. HD Hyundai plans to build those carriers in its yard in Ulsan, about 400 kilometers southeast of Seoul, and deliver them from 2027 in stages.

South Korean shipbuilders have swept 81% of orders for LNG carriers across the world so far this year with HD Hyundai’s deal in Qatar. If Hanwha, formerly Daewoo Shipbuilding & Marine Engineering Co., and Samsung ink contracts for the 30 tankers, South Korean companies’ share in the market is expected to rise to 90%.

HD Hyundai’s parent HD Korea Shipbuilding & Offshore Engineering Co., Hanwha and Samsung have been working to win vessel orders since the Qatari government started the LNG project in 2020.

Those three South Korean shipbuilders signed reservation of shipyard capacity agreements with Qatar Petroleum in 2020 for more than 100 LNG carriers.

TO TOP ORDER TARGETS

The price of vessel orders won by HD Hyundai have averaged at $229.4 million, about 13% lower than the recent price of a new LNG tanker.

HD Hyundai may have had difficulties in reflecting higher raw material costs to vessel prices as it signed a provisional contract with QatarEnergy, industry sources in Seoul said.

The South Korean company is still unlikely to face lower profitability as such a massive deal is expected to cut costs, those sources said.

“Shipbuilders usually have to design vessels differently to meet customer needs for each project. But the Qatari contract will help HD Hyundai reduce expenses for design and material procurements, given the size of the deal,” said a source.

HD Hyundai, Hanwha and Samsung have been enjoying surging orders since late last year, adding to expectations that all of them are likely to turn to the black this year for the first time since 2012.

Such a boom is predicted to support related industries.

“The LNG cooperation between the two countries is expanding to other businesses such as LNG tanker building, vessel operation and maintenance from LNG procurement, which dominated the past 20 years,” said Choi.

Write to Hyung-Joo Oh and Jae-Fu Kim at ohj@hankyung.com
 

Jongwoo Cheon edited this article.