83 vessels and a market exceeding 120 billion! Shipbuilding giants return to the marine engineering sector

With the global FPSO market continuing to heat up and a new wave of bidding for offshore equipment in South America and Africa, Hanwha Ocean, a South Korean company, has returned to the global offshore equipment construction stage after a four-year absence, signaling its renewed entry into the offshore engineering market.

It is understood that Hanwha Ocean will participate in the bidding for the design, procurement, and construction (EPC) project of the "P-86" FPSO, which will be used by Petrobras in the development of deep-sea oil fields in Brazil. This is the company's first challenge of an FPSO project since its acquisition by the Hanwha Group in 2023 and its renaming from Daewoo Shipbuilding to Hanwha Ocean. It is also the company's return to the global offshore equipment market after a four-year gap since it undertook the EPC construction contract for Petrobras' "P-79" FPSO in June 2021 as part of a multinational bidding consortium with Saipem, a subsidiary of Italy's ENI Group.

To increase production at the Marlim Sul and Marlim Leste oil fields in Brazil, Petrobras officially launched the tender for the "P-86" FPSO project last October. According to Petrobras' plan, it will invest US$64 billion in oil field exploration and production by the end of 2027, aiming to introduce 11 more FPSOs and increase production to 2.4 million barrels of oil.

The "P-86" FPSO is a medium-sized FPSO with a daily production capacity of 140,000 barrels of oil and 7 million cubic meters of natural gas. Petrobras originally set the bid deadline for April this year, but later extended it to June 6 and then again to November 3, citing oil price fluctuations and rising FPSO prices.

Shipbuilders from South Korea, China, Singapore, Malaysia, Brazil, and other countries will participate in the bidding for the "P-86" FPSO project, and Hanwha Ocean is the only South Korean shipbuilder that has decided to participate. This is because HD Hyundai Heavy Industries and Samsung Heavy Industries are focusing their efforts on building floating liquefied natural gas production, storage, and offloading units (FLNGs) and have decided not to participate in this bidding due to factors such as construction schedules.

The project uses a BOT (Build-Operate-Transfer) model, requiring the winning bidder to build and operate the FPSO in the initial stage before transferring it to Petrobras. This places higher demands on the financial and management capabilities of bidding companies.

FPSOs are known as "offshore refineries." They are difficult to build, require a high degree of integration and engineering precision, and have much higher construction costs than ordinary merchant ships. Their total cost usually ranges from US$1 billion to US$1.5 billion, and can even exceed US$2 billion. South Korean shipbuilding industry insiders say that FPSOs have always been a key focus and strength for South Korean shipbuilders. Because of the huge amount of money involved in a single contract, once the order market starts, it can bring large-scale order performance to shipbuilders in a short time.

To date, Hanwha Ocean has undertaken 8 FPSOs, successfully delivered 7, and currently has 1 under construction.

In recent years, FPSO prices have risen sharply. Last year, Petrobras ordered two FPSOs, "P-85" and "P-84," for US$4.07 billion, setting a new record for global FPSO order amounts. This price is about 75% higher than the approximately US$2.3 billion for the "P-79" FPSO signed in 2021.

It is worth mentioning that the "P-85" and "P-84" are Petrobras' largest ever FPSOs and among the largest in the world. These two FPSOs are being built by Seatrium, a Singaporean offshore engineering giant. Seatrium has transferred the EPC work for the hulls, living quarters, and some modules of these two FPSOs to CIMC Raffles in July 2024.

South Korean industry insiders say that with increasing demand for new FPSOs in South America, including Brazil and Guyana, and West Africa, the market size of FPSOs is expected to expand from approximately US$12 billion (approximately RMB 85.983 billion) in 2024 to approximately US$18 billion (approximately RMB 128.974 billion) in 2029, with an estimated 83 FPSOs to be ordered globally by 2030.

To return to the global offshore equipment market, Hanwha Ocean has been promoting a strategic transformation of its marine business in recent years. In April 2024, the company hired Philippe Levy, former president of the Americas region of SBM Offshore, a Dutch offshore oil and gas service provider, and appointed him as the head of the company's marine business division. Philip Levy will lead innovative changes in Hanwha Ocean's marine business division based on his expertise in the global marine business and management experience accumulated in numerous oil/gas projects.

The goal of Hanwha Ocean's marine business division is to transform into an EPCIO (Engineering, Procurement, Construction, Installation, and Operation) solution provider for various floating offshore equipment such as FPSOs and FLNGs, and marine renewable energy-related businesses. At the same time, Hanwha Ocean acquired Dyna-Mac, a Singaporean offshore equipment manufacturer, last year and renamed it Hanwha Ocean Singapore this year, concentrating its efforts on strengthening its offshore engineering business.

To accelerate its layout in the global offshore equipment market, Hanwha Ocean also established several new overseas legal entities in the third quarter of last year, including two in the Cayman Islands whose main business is drilling, in an attempt to expand its global market share.

In November 2024, Hanwha Ocean held an opening ceremony for its Global Project Center (GPC) in Amsterdam, Netherlands. This center is Hanwha Ocean's first offshore engineering business base in Europe and will be responsible for marine engineering and project management. Hanwha Ocean said that in order to actively respond to the expansion of the offshore engineering market, the company's establishment of a business base in Amsterdam, where companies that design offshore engineering projects such as FPSOs are located, will help it recruit relevant professionals locally.

In addition, Hanwha Ocean has made significant progress in the research and development of new FPSOs in recent years. In October 2024, the company's new generation of standardized FPSO pre-FEED (Pre-Front End Engineering Design) received concept approval certificates from both ABS (American Bureau of Shipping) and BV (Bureau Veritas). Through this concept approval, Hanwha Ocean can provide customers with a standardized FPSO design that can simultaneously achieve the goals of shortening construction time and saving costs.

This type of FPSO is 340 meters long and 62 meters wide, designed to produce 190,000 barrels of crude oil per day and store approximately 2.38 million barrels of crude oil. In addition, Hanwha Ocean has developed a topside production module with an area of 17,600 square meters that can accommodate up to 55,000 tons of crude oil and natural gas, using a hull design that can operate for up to 20 years, maximizing operational efficiency.

It is understood that in the market where offshore equipment demand is expected to increase, the marine environmental conditions in West Africa are relatively harsh. Based on this concept approval, Hanwha Ocean will accelerate the development of standardized FPSOs that can also be deployed in other regions such as South America.

Furthermore, at the Offshore Korea 2024 exhibition held in Busan, South Korea in October 2024, Hanwha Ocean showcased its internationally advanced marine equipment technologies, including the world's largest FPSO, which utilizes cutting-edge technology and can produce up to 220,000 barrels of crude oil and 4.4 million cubic meters of natural gas per day.