South Korean engineering, procurement and construction (EPC) contractors say that they still regard the Middle East as their core market and expect to continue their domination of the region’s process plant sector for some time.   

Speaking from Seoul, several high ranking officials from major EPC contractors have identified the Middle East as a strategic market, with Saudi Arabia in particular offering the most opportunities for new business.

The officials also believe that the major threat to their respective companies winning new business in the region will continue to come from their South Korean competitors, especially in oil and gas projects, rather than contractors from other parts of the world.

Value of planned projects in the GCC by sector
Sector Value ($bn)
Alternative energy $5.34
Construction $71.45
Industry $2.68
Infrastructure $22.85
Oil & gas $65.65
Petrochemicals  $91.48
Power $104.50
Refining $53.68
Water & wastewater $24.82
Source: MEED Projects 

“The market is becoming saturated in the Middle East and that is because the rest of the world is still relatively quiet in regards to opportunities,” says a senior source from a South Korean EPC contractor. “In the past maybe six contractors prequalified for projects [in the Middle East], but now you are getting over 10 contractors bidding for the same job.”

The source adds that even though more and more companies are bidding for work, it is still the South Korean firms that are dominating.

“Other contractors wonder how South Korean firms can bid so low for work in the Middle East, but the fact remains that we invest heavily and our focus is firmly on the region,” he says. “We have got the track record for executing projects now, especially in oil and gas and this is also helping us.”

Many of the major project wins in the first quarter of 2011 have gone to South Korean companies. Saudi Aramco awarded all four onshore packages for the $4.6bn Wasit Gas development programme to South Korean contractors, with SK Engineering & Construction picking up three and Samsung Engineering picking up one (MEED 25:1:11).

Samsung Engineering then secured all four packages for Aramco’s $2.5bn Shaybah natural gas liquids (NGL) project in the Empty Quarter of the kingdom (MEED 18:3:11). The company has also picked up a number of other packages in the Saudi Arabian petrochemical and metals sector with a combined value of more than $1bn.

Samsung Engineering and SK’s successes have been reported by the South Korean media as further proof of the country’s continued dominance of the Middle East plant market.

However, as many South Korean competitors begin to see their order backlogs shorten, the next round of major EPC plant tenders could result in yet more aggressive bidding rounds.

 “After winning a number of Middle East major contracts in 2009, we decided that a period of consolidation was required over the past 12 months,” says the president of a major South Korean EPC contractor. “We now feel that we are in a position to focus our attention on the remaining major [Middle East] projects in 2011 and we expect to be competitive on both.”

The two projects referred to are the $18bn-plus Aramco/Dow petrochemicals joint venture and the $5bn PetroRabigh phase II. The first is a joint venture with the US’ Dow Chemical planned for Jubail in the Eastern Province, while PetroRabigh is a joint venture between Aramco and Japan’s Sumitomo Chemical, being planned for the Red Sea coast.  

The Middle East power and water sector is also now being aggressively targeted by South Korean EPC contractors as an area for growth. Such a move has not gone unnoticed by rival South Korean companies, who usually specialise in power and water projects.

“We are noticing that more and more companies are being prequalified for [Middle East] power and water projects,” says In-Soo Chun, chief operating officer of the plant division of Hyundai Heavy Industries. “However, we are still confident that we can win around $5bn-worth of work in the Middle East power and water sector in 2011.”

In regards to the Middle East region as a whole, Saudi Arabia and the other GCC countries remain the focus. All of the executives MEED spoke to said that while Iraq would play a part in future operations, the country is still not ready for major EPC operations.

“Saudi Arabia and the GCC will dominate in the short to medium term, but Iraq is definitely one for the future,” Chun says. “The country needs to be rebuilt from scratch, but it is not ready yet.”