February 09, 1998 in Social Responsibility News

SAMSUNG Heavy Industries Receives an Order for an Advanced US$270 Million Drillship from Europe

SEOUL, Korea - February 9, 1998 - Samsung Heavy Industries Co (SHI) announced today that it has received a turnkey order for a 108,000MT displacement drillship, used for deep-sea oil development, from Saipem Co. of Italy. The state-of-the-art ship comes with a hefty US$270 million price tag, the highest amount ever paid for a ship built in Korea.
This development is significant for several reasons. It is the first new ship order received (by a Korean shipyard) this year, and the total contract amount is equivalent to or higher than that for three very large crude oil carriers (VLCCs). The sophisticated new vessel comes with extremely high added value, costing significantly more than the $220 million price for an LNG carrier.

With the IMF bailout of Korea late last year, the credit ratings of domestic financial institutions and the country as a whole have plummeted. This has caused domestic shipyards to face the cancellation or deferment of many current orders, while no new orders have been received in 1998. The fact that Samsung has managed to win out over shipyards in Europe and Japan with simply an advanced payment refund guarantee issued by the Korea Export-Import Bank reflects the company's perceived reliability in the eyes of the ship owners. Samsung's receipt of this order bodes well for the Korean shipbuilding industry as a whole. Industry experts now expect Korean shipyards to receive new orders this year and to get back to executing orders that were put on hold last year.

The ship ordered by Saipem Co. is 228 meters long, 42 meters wide and 19 meters deep. She will be capable of drilling for oil and gas up to 10,000 meters below the ocean surface (to include the depth of the water and the depth below the seabed). This is a greater distance than the height of Mt. Everest, which measures 8,848 feet above sea level.

The ship is also built to be environmentally safe. A double hull construction prevents oil spills in the event of a collision, and non-polluting electric engines power the ship. Sophisticated drilling equipment as well as crude oil production and storage facilities are built into the center of the ship's hull.

A dynamic position system keeps the vessel steady in turbulent weather and rough seas. The on-board electric generators (fueled by natural gas brought up from under the sea) provide power for all on-board facilities, ensuring stable operations.

In spite of having heavy drilling, production and storage equipment on board, the next-generation vessel can navigate at 12 knots or faster. The ship will be used in deep waters or areas with extreme currents, where installation of offshore platforms would be impossible. It is also useful when a company wants to find out quickly and cost effectively if reserves exist in a particular offshore oil or gas field. This ship is scheduled for delivery in April 2000, when it will be used for exploration and drilling work in virgin oil fields (where reserves are yet to be confirmed) in the Gulf of Mexico, off the coast of Africa and in the North Sea off the UK.

Over the past two years, SHI has received orders for ten special-purpose ships related to offshore oil and gas development, including drillships; floating production, storage & offloading (FPSO) vessels and shuttle tankers. Samsung currently has at least a 50% share of the world market for the sophisticated drill ships used in deep sea oil and gas exploration, a clear indication of the company's leading position in this advanced technology.

World trends indicate an increase in demand for special-purpose ships related to offshore oil and gas development. Samsung is focusing its marketing activities on FPSO vessels, semi-submersible drilling rigs and other value added vessels, and targets this year's sales at $2.1 billion.

Samsung Heavy Industries Co., a division of the US$93 billion, Korea-based Samsung Group, operates four major business divisions: Shipbuilding, Industrial Machinery, Construction Equipment, and Construction. The company had sales of US$4 billion in 1996 and employs 11,550 people worldwide. For more information, please access www.shi.samsung.co.kr


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