Daewoo Shipbuilding to Build Drill Ships for Petrobras

SEOUL (Dow Jones), Dec. 15, 2009

Daewoo Shipbuilding & Marine Engineering Co. will build more than $1 billion worth of drill ships for Petroleo Brasileiro (PBR), people familiar with the matter said Tuesday, making it the first South Korean company to get a contract from Brazil's state-run oil company.

"Daewoo Shipbuilding will sign a contract this week in Brazil, and there will be an official announcement this Friday," one of the people with direct knowledge of the matter told Dow Jones Newswires.

The deal may give the company an edge over other shipbuilders in future bids for offshore facilities for Petrobras, such as drill ships and floating production storage & offloading units, analysts said.

However, Daewoo's bigger rivals such as Hyundai Heavy Industries Co. and Samsung Heavy Industries Co. could also get such orders from the Brazilian company, which plans to place more than $40 billion of orders for offshore facilities in the long term, Martin Song at Woori Investment & Securities said.

Samsung Heavy and Daewoo Shipbuilding have been regarded as prime candidates to get offshore facility orders from Brazil due to their know-how and technology, he said.

"As the shipbuilding industry has not entered a recovery phase yet, the drill ship order will provide short-term momentum (for Daewoo Shipbuilding) from Friday through this month," Jeon Jae-cheon at Daishin Securities said.

If orders for new vessels remain at current "record-low" levels through the second half of 2010, shipbuilders will have to join the low-priced vessel market to preserve their financial status, Jeon said.

In April, South Korea had suggested that the two countries do a barter deal in which South Korean shipbuilders provide the South American country with drill ships or FPSOs in return for stakes in deep-sea oil fields there, the Ministry of Knowledge Economy said Tuesday.

But Brazil didn't accept the suggestion as the country doesn't need to sign contracts offering such "favorable" terms, a ministry official told Dow Jones by phone. "Even without such a barter deal, shipbuilders will line up to build ships, even in Brazil."

Daewoo Shipbuilding said that not counting the Petrobras order, it has so far this year received a mere $1.1 billion of new orders for four bulk ships, two ferries, three wind turbine installation vessels and two barges as struggling shipping companies held off orders for new vessels amid the economic slowdown.

It had originally targeted $10 billion in fresh orders in 2009, down 15% from the previous year's $11.8 billion.

Copyright (c) 2009 Dow Jones & Company, Inc.

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