Saudi Aramco and HHI sign shipyard MoU
Oil giant Saudi Aramco and Hyundai Heavy Industries (HHI) have signed an MoU to develop a shipyard and a maritime diesel engine facility in Saudi Arabia, among other projects.
A prior arrangement for a shipyard project with Singapore's Sembcorp Marine expired, and Saudi shipowning company was allowed to expire by Bahri in late October, “without any financial commitments”.
“The parties intend to continue their discussion and sign a new MoU or extend the expired [Sembcorp] MoU,” a statement said, adding that “Bahri will make an announcement . . . if any material development takes place.”
The new MOU with Hyundai comes in the wake of a significant contract between HHI and Bahri, the sole provider of tanker shipping to Saudi Aramco.
In a deal announced in May and July, HHI was contracted to build ten new 300,000 dwt oil tankers for Bahri over several years.
Analysts value the tanker order at nearly US $1 billion, and in October Bahri was said to be seeking a loan of more than US $700 million for their purchase.
In April, Saudi Arabia's oil minister Ali al-Naimi, Saudi Aramco's chief Khalid Al-Falih and several other Aramco board members visited HHI's yard in Ulsan, near a refinery operated by Aramco-controlled firm S-Oil.
Bahri had entered into a ten-year contract to carry crude to this refinery just weeks before the visit.
Bahri has been expanding rapidly in recent years. On October 22, the tanker company purchased two existing 300,000 dwt VLCCs from Daewoo Shipbuilding and Marine.
The DSM and HHI orders will increase Bahri's VLCC fleet by a third, bringing it to a total of 46 tankers when delivered.
This comes after Bahri nearly doubled its fleet in 2012 when it paid US $1.3 billion to buy Vela, the shipping arm of Saudi Aramco.
The recent VLCC deal and MOU agreement will come as welcome news for HHI. In October the company announced a loss of nearly $400 million in the third quarter, over seven times the amount predicted by analysts.
The South Korean shipbuilding sector is in a state of financial crisis, and sources indicate that as many as 10,000 people could be laid off over the course of the next several years.
Cumulatively, the sector owes approximately $44 billion, and the South Korean Financial Supervisory Service has recently indicated that the yards could pose a systemic risk to the economy if not successfully restructured.