South Korea Cos Mull Barter of Drill Ships for Oil Deals with Brazil

Santos Basin, Campos Basin
(Click to Enlarge)

SEOUL (Dow Jones Newswires), Jan. 7, 2009

South Korean companies are considering a barter deal with Brazil under which local shipbuilders would provide drill ships or oil development facilities in return for stake in the South American nation's oil fields, said an official at the Ministry of Knowledge Economy Wednesday.

"Major shipbuilders and state-run oil developer Korea National Oil Corp., or KNOC, are working to form a business model for this because it will be the first such deal for the country," said the official, declining to be identified.

The plan was proposed by the South American nation when the two countries held summit talks in Brazil in November last year.

Brazil has suggested that South Korean shipbuilders, which are the world's biggest, provide the country with drill ships or floating production, storage and offloading platforms in return for stake in its oil fields in the Santos area, the official said.

The plan would be good for KNOC given that local companies are facing difficulties in raising funds from overseas for developing oil and gas areas amid the global credit squeeze. For the shipbuilding industry as well, where orders have been canceled recently due to the global slowdown, the agreement will provide a ready market and keep order inflows steady, the official said.

Resource-constrained South Korea, which meets most of its energy needs from imports, is trying to secure more supplies by acquiring stakes in crude oil and gas blocks overseas and insulate itself from supply disruptions and price spikes.

The local companies may come up with a business model and financing details in the next couple of months and work to finalize the deal with Brazil, said the official.

Yoon Yo-han, spokesman at Daewoo Shipbuilding & Marine Engineering, told Dow Jones Newswires that the company and Hyundai Heavy Industries Co. received an offer from the government to participate in the barter deal.

"There was a working-level meeting between shipbuilders and KNOC in December but there has been no further development on the deal yet," Yoon said.

Officials at KNOC, Hyundai Heavy and Samsung Heavy Industries Co. weren't aware of any such barter deal talks.

In November, South Korea and Brazil's Petrobras signed a memorandum of understanding as per which any payment for orders Petrobras places with Korean companies for vessels and plants will be insured by state-run Korea Export Insurance Corp., or KEIC.  

Copyright (c) 2008 Dow Jones & Company, Inc.

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