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With tankers passe, shipbuilders turn to manufacturing oil rigs

March 17, 1981



Okpo, South korea

Japan's domination of the fast-growing oilrig market has suddenly come under a determined Korean challenge. Japanese builders have their fattest order books ever as a result of worldwide offshore oil exploration.

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But the Koreans, who jumped into the market only last year, are already pressing strongly for future business with prices and financing terms even the Japanese are finding it hard to match.

Korea made a big splash in its initial year in this sector of the shipbuilding market by securing nine orders worth over $330 million from customers in America, Britain, and elsewhere.

Two of the orders were won by Hyundai, who launched Korea's entry into the international shipbuilding market in the mid-1970s from its giant yard at Ulsan, on the east coast, where it has a 1-million-ton dock.

The other seven orders went to Daewoo Industrial company, which only opened its first shipyard in 1980. The company, however, is already spearheading the dramatic expansion planned by the all-powerful Daewoo group of companies.

The rigs will be turned out at Okpo, a new industrial area still under construction on the southern island of Koje, about 30 miles from the major part of Pusan.

Its main features will be a drydock as big as anything now seen in Japan -- capable of turning out, should the need arise, oceangoing vessels of up to 1 million deadweight tons.

When Hyundai built its 1-million-ton dock, it did so in anticipation of continued world demand for mammoth tankers like the 500,000 dwt ships Japan was turning out in the early 1970s. The 1973 oil shock killed that strategy.

Instead, the Korean company turned to using the huge facility to build small general- purpose freighter fleets for domestic customers or shipping companies in developing countries.

Daewoo built its 1.2-million-ton facility deliberately with a view to being able to divide it up to fulfill different orders simultaneously.

And the order backlog of at least a year, which includes, apart from the oil rigs, specialty vessels like LNG and LPG tankers and bulk ore carriers," says company president Kim Duk Choong.

In other words, the Koreans have made a very rapid jump into the high-technology areas, even if their Japanese competitors would like to continue thinking otherwise.

The two are on a collision course because both are strong in the semisubmersible rigs that can drill in deeper waters than the socalled jack-up rigs, and cost twice as much to make.

With the Okpo yard scheduled for completion in late 1981, industry leaders feel Korea will be able to make a quantum jump in output and exports over 1980, which itself was a record year.

The Shipbuilding Industry Association reports that the country earned $618 million from ship exports last year, a 19 percent hike from the previous year.

Although the number of vessels exported dropped from 29 to 27, total tonnage was up 53 percent at 464,449 tons, indicating Korea's move into larger, more sophisticated ships.

Hyundai has dominated the market. But with Daewoo now getting into full stride, Korea's building capacity will almost double to about 4.1 million gross tons annually.

Apart from boasting a drydock more than five football fields long, Okpo will form the centerpiece of an integrated industrial park planned by Daewoo to incorporated five satellite industrial manufacturing facilities.

These include joint ventures with Swiss and German companies for manufacturing turbine generators and industrial boilers. There will also be a facility for the production of industrial machinery and equipment like cement, chemical, and paper plants. This involves a joint venture with International Telephone & Telegraph Corporation for the fabrication of power plant and industrial piping.

By the time the complex is completed in 1982, it will have required more than

The company has also mapped out a master plan for construction of an entirely new support city with a population of over 100,000, which will require another $ 600 million for housing, shops, schools, and government offices.

In this, Daewoo will be following the lead of Hyundai, which built an entirely new satellite town around its Ulsan shipyard on land reclaimed from the sea.