South Koreans set to dominate contract awards in the Gulf

27 June 2011

The aggressive pricing strategy is starting to have a real impact on their competitors in the region

Whenever the conversation turns to South Korean engineering, procurement and construction (EPC) contractors at oil and gas conferences, a series of conspiracy theories are always peddled about how they can manage to submit such low bids for the region’s megaprojects. 

Government subsidies, special gilt-edged deals with vendors, as well as their world famous work ethic are always mooted as reasons for the continued South Korean success.

All South Korean contractors strenuously deny accepting any form of government subsidy at all. When interviewed recently, Samsung Engineering said that only 40 per cent of its suppliers were from their own domestic market.

While it has undoubtedly become a cliche, the South Koreans are expected to work long hours for no additional overtime pay. With the large number of engineers now required on huge GCC plant projects this gives them some price advantage, especially if those engineers are deployed to formulate incredibly accurate costs at the bid stage. 

The South Korean strategy of aggressive pricing is not a new initiative. It has been used since the early 1990s when companies such as Daelim Industrial, GS Engineering & Construction and Samsung started competing against the Japanese in the South East Asia plant market.

While they continue to confound the industry by executing projects for bargain basement prices, they are still going to be favoured by companies like Saudi Aramco.

So is the South Korean model sustainable? At 20 years and counting the obvious answer has to be  yes.

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