A Review of the Nigerian Energy Industry

Client cancels $471m FPSO order with Samsung Heavy

02 January 2013, SEOUL –  Samsung Heavy Industries Co Ltd said an Asian firm which it did not identify cancelled an order for a floating production, storage and offloading (FPSO) unit worth 505 billion won ($471.71 million).

The buyer had previously delayed the order due to financing woes and difficulty in obtaining a charter for the vessel,  Samsung Heavy said in the regulatory filing on Monday.

The order – worth about 4 percent of the annual sales of the world’s third-largest  shipbuilder – was made in June 2007, and Samsung Heavy was initially scheduled to deliver the FPSO by September 2010. The delivery deadline was subsequently postponed to Dec. 31, 2012.

This year has been a challenging year for some FPSO owners, with the euro zone debt crisis making it tougher to obtain financing for projects and energy explorers holding back in response to an uncertain demand outlook for oil.

“It is not an insignificant sum, so it may affect the company’s fourth-quarter earnings,” said Shim Won-seob, an analyst at IBK Investment & Securities. “However, since it is a FPSO, rather than a merchant vessel, they will probably be able to find another buyer for it.”

Some analysts said this particular cancellation was likely due to the individual circumstances of the buyer.

Shares in Samsung Heavy closed at 38,550 won on Friday, up 2.25 percent. Trading will resume on Wednesday when the stock market opens.

South Korean shipbuilders underperformed in 2012, with the sub-index gaining just 3.4 percent compared to the Korea Composite Stock Price Index (KOSPI), which rose 9.4 percent.

*The Economic Times

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  • With the pressure of underperforming in 2012, it is no wonder then that Samsung will be doing everything and anything possible to secure jobs from around the world, including trying to get some from under the table transactions in Nigeria.