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1. Rise of the South Korean contractor | ArabianOilandGas.com Page 1 of 3
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PEOPLE MEOS 2011 - Brilliant Fact of the
Rise of the South Korean contractor Day
COMMENT on Feb 20, 2011
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PRODUCTS & By Wissam Batran, consultant, Business Advisory, Contax
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HAVE YOUR SAY Middle East dominates S.Korea contract
One of the most striking aspects of the GCC energy EPC market in the last
work
BLOG few years has been the rise of the South Korean contractors as the
dominant players. This is not a surprise to South Korean companies who Middle East oil to South Korea down 5.6%
ADVERTISE
seem to have a talent in going up the learning curve relatively quickly. Korean firms seeking alternatives to
RSS FEEDS One example of this rise to excellence is car manufacturing: in the 1990’s, Iranian oil
South Korean manufactured cars were considered bottom end and
CONTACT Abu Dhabi and Korea in E&P and
relatively unreliable. It took, however, only a dozen years for South The credit crunch saw South Korean contractors stockpiling pact
SIGN IN/REGISTER Korean cars to become some of the most reliable and price-competitive gain widespread acceptance from GCC project
cars in the world with recognised brand names such as Kia Motors and owners eager to avail of their competitive costs.
Hyundai. (GETTY) NEWSLETTER SUBSCRIPTION
NEWSLETTER
[More Images] Email:
SUBSCRIPTION A more relevant and more formidable example is ship-building, where
Email: South Korean companies have become global leaders and are credited
with making LNG transport cost-effective, and thus contributing to the Go
Go
globalisation of the gas market which has culminated in the worldwide LNG boom. The South Korean EPC experience is
no different, where eagerness to learn and years of hard work has resulted in them becoming one of the hottest topics
of discussion in the GCC energy sector over the past few years.
Going through the Learning Curve
Throughout the boom years and up to the third quarter of 2008, projects were being announced frequently and one of
the main concerns for project owners was finding contractors that were capable of executing projects with good quality
standards and without delays. Costs were also an issue but a less imminent one as cash and credit were available.
South Korean EPC contractors were regarded as being in a lower league than their Western and Japanese counterparts
and bid for mostly non-process packages.
Generally, when they bid for process packages, it was in a consortium with a Western or Japanese contractor where
the South Korean contractor would be responsible for the construction and its consortium partner would be responsible
for the engineering. These consortia gave Western and Japanese contractors the ability to place price-competitive bids
– thanks to the lower costs of South Korean contractors – and allowed South Korean contractors to participate and gain
experience in such complex projects.
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FEATURED COMMENT
All companies are in it for profit, this is
the basic premise of business. As for setting
up premises & recruiting, most
5 Comments
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To illustrate South Korean contractors’ role in the GCC energy market towards the end of the boom years, Contax
Partners estimates that in 2007 and 2008 combined, South Korean contractors won over c.US$29bn worth of projects
(both alone and in consortia) which represented c.23% of the energy Capex for that period. Although still winning
mostly non-process packages, we started to see South Korean contractors such as Daelim and Samsung Engineering
single-handedly winning major process packages in Kuwait and Saudi Arabia, especially in petrochemicals and refining
(e.g. the Saudi Kayan project).
The Breakthrough
2009 saw a major breakthrough for South Korean contractors. After the credit crunch, the energy project market went
from being EPC-led to a project owner-led market, as contractors were thirsty for work and project owners were eager
http://www.arabianoilandgas.com/article-8505-rise-of-the-south-korean-contractor/ 5/3/2012
2. Rise of the South Korean contractor | ArabianOilandGas.com Page 2 of 3
to reduce costs as much as possible. South Korean contractors were the perfect match for these owners as they had
gained considerable engineering experience and exposure to major projects yet were able to keep their costs much
more competitive than the traditional top tier EPC contractors.
These new conditions resulted in South Korean contractors winning just under c.US$47bn worth of energy Capex in
2009 alone, c.62% more than 2007 and 2008 combined. Their share of the energy EPC market more than doubled
from c.23% to c.49%. The highlight of these awards was the c.US$20bn UAE Nuclear Power Plant, which enhanced
South Korean companies’ position as an important player in the high complexity and mega-project space. What is even
more astonishing is that over c.75% of the projects won by South Korean contractors in 2009 were process-related
(including the nuclear power plant). In the UAE, Takreer’s Ruwais Refinery Expansion project is another example in
2009 where South Korean contractors were awarded the responsibility for the execution of the majority of the project,
winning 5 packages worth c.US$9.6bn: more than c.90% of total project Capex.
2010 was again a remarkable year for South Korean contractors as they were awarded c.US$28.5bn worth of projects
which represented 45% of the total GCC energy Capex. These project awards were not only important for their Capex
amounts but also for the size of projects undertaken (including packages of mega-projects). Of the 2010 Capex
awarded to South Korean contractors, c.75% is considered large scale (above US$1bn in size). This year’s percentage
saw a slight dip from the c.81% in 2009 which was largely due to the award of the UAE Nuclear Power Plant. Taking
this latter mega-project out of the picture, their large project percentage stood at c.68% of Capex won in 2009,
signifying that 2010 in fact saw a slight increase in the percentage of large project awards for South Korean contractors
over the previous year.
Page: 1 2
READERS' COMMENTS
Dan (Feb 9, 2012)
houston
USA
Korean EOC Contractors
All companies are in it for profit, this is the basic premise of business. As for setting up premises & recruiting, most of
the recruitment is from countries such as India & Philipines, paying low salaries. There are a few 'western expats' to
negotiate contracts & generate the impression of specialist competence, when in fact most of the engineering is
undertaken by the aforementioned non western expats. Many designs are not efficient or 'clever' because they will
always err HEAVILY on the side of safety & stick with traditional designs. Korea has a long history of delivering a quality
product at a good price on time - e.g. offshore platforms, FPSOs & ships by Daewoo/Samsung/Hyundai. You would be
surprised at what is engineered in countries that are specifically excluded from oil company approved vendor lists! E.g. a
API fuel pumps for a large GCC national oil co. were to have 'no Chinese or Indian content'. These were awarded to a
well known, long established German Pump co. Although made & FAT tested in Germany, I came to know that API Seal
Plan & the base plate design were all engineered in India! Just as Korea has made massive inroads into the US car
marketat the expense of US & US based Japanese manufactureres mainly, expect the same in the lucrative O&G EPC
business!
Jose (Apr 3, 2011)
Dammam
Saudi Arabia
Korean EPC
Its true I worked with 2 Korean Companies. They use all Korean products even stationary items they import from Korea,
Also give many subcontracts to their companies in local name. They want to take all project money to korea.
Ole (Apr 2, 2011)
Doha
Qatar
KOREAN EPCs
Totally agree with both David and Robert. Korean EPCs are bad news for everyone in the Middle East. They are
supported financially by their government creating unfair competition and they have no intention working with any
locally based company unless they have absolutely no alternative.
Robert (Feb 24, 2011)
Dubai
United Arab Emirates
Say no to Korean Influx
I have to agree with David. The principal of using 'foreign' companies rather than those that are based in the region will
always have a bad knock on effect. Sourced out resources that are not within the UAE boarders is a recipe for disaster.
UK, supported foreign tenders in the late 70's, manufacturing in UK has taken a nose dive since. It is essential that
projects are managed and fabricated in this region by companies based here. Locally based EPC and FEED need to be
more 'patriotic' for the benefit of local business in the ME.
David Dickie (Feb 22, 2011)
Dubai
United Arab Emirates
Korean EOC Contractors
While the GCC countires continue to award large percentages of their projects to Korean contractors, this is extremely
bad news for companies which set up in the GCC to support these projects. We come here, set up premises, we recruit
staff and we commit to the region. But Korean EPCs do not support the local market, they prefer to buy in Korea and
ship to the GCC, thus effectively removing half of our market potential in the Oil & Gas sectors. If this continues to
happen, many companies will close their GCC offices and move elsewhere, as the cost of being here is high, and if we
are not to have a chance of supplying to these projects, we need to leave. This will be devastating to the GCC
economies, and I hope they relaise before it is too late.
COMMENTS
http://www.arabianoilandgas.com/article-8505-rise-of-the-south-korean-contractor/ 5/3/2012
![Rise of the South Korean contractor | ArabianOilandGas.com Page 1 of 3
HOME TENDERS EVENTS DIRECTORY MAGAZINES JOBS (172) Search
NEWS
HOME / RISE OF THE SOUTH KOREAN CONTRACTOR
LATEST FROM THE BLOG
ANALYSIS
PEOPLE MEOS 2011 - Brilliant Fact of the
Rise of the South Korean contractor Day
COMMENT on Feb 20, 2011
How much
unconventional gas has
SPECIAL REPORTS 5 Comments been discovered to date?
More »
IN PICTURES
PRODUCTS & By Wissam Batran, consultant, Business Advisory, Contax
SERVICES RELATED ARTICLES
Partners
HAVE YOUR SAY Middle East dominates S.Korea contract
One of the most striking aspects of the GCC energy EPC market in the last
work
BLOG few years has been the rise of the South Korean contractors as the
dominant players. This is not a surprise to South Korean companies who Middle East oil to South Korea down 5.6%
ADVERTISE
seem to have a talent in going up the learning curve relatively quickly. Korean firms seeking alternatives to
RSS FEEDS One example of this rise to excellence is car manufacturing: in the 1990’s, Iranian oil
South Korean manufactured cars were considered bottom end and
CONTACT Abu Dhabi and Korea in E&P and
relatively unreliable. It took, however, only a dozen years for South The credit crunch saw South Korean contractors stockpiling pact
SIGN IN/REGISTER Korean cars to become some of the most reliable and price-competitive gain widespread acceptance from GCC project
cars in the world with recognised brand names such as Kia Motors and owners eager to avail of their competitive costs.
Hyundai. (GETTY) NEWSLETTER SUBSCRIPTION
NEWSLETTER
[More Images] Email:
SUBSCRIPTION A more relevant and more formidable example is ship-building, where
Email: South Korean companies have become global leaders and are credited
with making LNG transport cost-effective, and thus contributing to the Go
Go
globalisation of the gas market which has culminated in the worldwide LNG boom. The South Korean EPC experience is
no different, where eagerness to learn and years of hard work has resulted in them becoming one of the hottest topics
of discussion in the GCC energy sector over the past few years.
Going through the Learning Curve
Throughout the boom years and up to the third quarter of 2008, projects were being announced frequently and one of
the main concerns for project owners was finding contractors that were capable of executing projects with good quality
standards and without delays. Costs were also an issue but a less imminent one as cash and credit were available.
South Korean EPC contractors were regarded as being in a lower league than their Western and Japanese counterparts
and bid for mostly non-process packages.
Generally, when they bid for process packages, it was in a consortium with a Western or Japanese contractor where
the South Korean contractor would be responsible for the construction and its consortium partner would be responsible
for the engineering. These consortia gave Western and Japanese contractors the ability to place price-competitive bids
– thanks to the lower costs of South Korean contractors – and allowed South Korean contractors to participate and gain
experience in such complex projects.
Story continues below
Advertisement
FEATURED COMMENT
All companies are in it for profit, this is
the basic premise of business. As for setting
up premises & recruiting, most
5 Comments
Read more comments »
To illustrate South Korean contractors’ role in the GCC energy market towards the end of the boom years, Contax
Partners estimates that in 2007 and 2008 combined, South Korean contractors won over c.US$29bn worth of projects
(both alone and in consortia) which represented c.23% of the energy Capex for that period. Although still winning
mostly non-process packages, we started to see South Korean contractors such as Daelim and Samsung Engineering
single-handedly winning major process packages in Kuwait and Saudi Arabia, especially in petrochemicals and refining
(e.g. the Saudi Kayan project).
The Breakthrough
2009 saw a major breakthrough for South Korean contractors. After the credit crunch, the energy project market went
from being EPC-led to a project owner-led market, as contractors were thirsty for work and project owners were eager
http://www.arabianoilandgas.com/article-8505-rise-of-the-south-korean-contractor/ 5/3/2012](https://image.slidesharecdn.com/toptierkoreanepc-1-120705220639-phpapp02/85/Top-tier-korean-epc-1-1-320.jpg)
