South Korean firms face fierce competition

18 April 2008

Despite a fall in the value and number of engineering, procurement and construction awards in the Middle East's energy sector over the past 12 months, opportunities have been growing for smaller, more nimble firms.

In particular, the presence of three South Korean firms in the top six in this year's rankings shows that Seoul-based contractors are once again a real force.

South Korean firms have been in the region since 1973, and when the final figures for 2007 are published, they are expected to be double the level of 2006 and close to the record set in 1981.

Industrial giants like Hyundai Heavy Industry are making their first profit for five years because of higher Middle East orders.

Japanese and Chinese firms are expected to follow Korea's lead and make greater inroads into the region over the next few years, having already had success in the construction, power and water, and industrial sectors.

But all these newcomers will find the going tougher. The competitive threat from large Western contractors will increase over the next few years as they deliver their current mega-projects to clients and look for their next set of contract wins.

There is also a danger that the competitive prices offered by Far East firms for fixed-price contracts will come back to haunt them, given the continued spike in labour and procurement costs.

Japan's Chiyoda Corporation has already weathered a financial storm in Qatar in its attempt to deliver a series of liquefied natural gas trains.

Korean firms rely on the Middle East for about 60 per cent of their revenues. While famous in the region for their price and efficiency, they face a new set of challenges to maintain their growth after such an impressive year.

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