Hyundai Heavy Industries Obtains $1.4 Billion EPC Contract from Daewoo

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Researched by Industrial Info Resources (Sugar Land, Texas)--Hyundai Heavy Industries Limited (SEO:009540) (Ulsan, South Korea) has secured a $1.4 billion contract from Daewoo International Corporation (SEO:047050) (Seoul, South Korea) to set up offshore and onshore infrastructure facilities for the latter's Shwe gas project in Myanmar. Hyundai, along with Doris Engineering (Paris, France), will be responsible for supplying engineering, procurement and construction services to the venture. Doris is likely to be involved in the design phase of the contract, while Hyundai will execute installation and fabrication activities.

Hyundai will be involved in the construction activities for the first phase of Daewoo's Shwe project, as a part of which it plans to develop two gas blocks in the Bengal Bay--Blocks A-1 and A-3--located in the state of Rakhine, about 70 kilometers from Myanmar. The two blocks have been estimated to hold about 7.7 trillion cubic feet of gas.

Under the contract, Hyundai will develop a 40,000-ton offshore gas platform and a subsea gas production system; a subsea pipeline to Ramree Island; a jetty; and a supply base. It also will establish an onshore gas terminal and an 825-kilometer onshore gas pipeline to transport natural gas from the facility to China. Other likely expansions include the addition of a wellhead platform, a manifold, and a compression platform.

Despite protests against ventures initiated by the ruling junta in Myanmar, work on the project is likely to commence by the end of this year, with Hyundai and Daewoo looking to finalize the contract once the Myanmar government clears the project.

Daewoo already has entered into a 30-year purchase and supply deal with China National Petroleum Corporation (CNPC) (Beijing) for a daily supply of 500 million cubic feet of natural gas from the Shwe project, once it is operational in March 2013. Daewoo owns a majority 51% stake in the Shwe project, with partner companies Korea Gas Corporation (SEO:036460) (Gyeonggi-Do, South Korea) and Gail India Limited (BSE:532155) (New Delhi) holding stakes of 8.5% each; ONGC Videsh Limited (BSE:500312) (New Delhi) holding a 17% stake; and Myanmar Oil & Gas Enterprise (MOGE) holding the 15% balance stake.

Daewoo and MOGE have been exploring the regions off the Bay of Bengal since 2004 in a bid to find gas, which was discovered eventually. While gas from the A1 block was initially earmarked for India, problems involved in the construction of a pipeline across Bangladeshi territory delayed the potential deal. Meanwhile, the stakeholders in the project and the Myanmar government struck a deal with China for export of natural gas from the region. If India manages to circumvent Bangladeshi territory in its gas transportation route, it may still be able to get a share of gas from the Shwe venture.

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