Hyundai Heavy Industries has temporarily shut one of its two factories making offshore oil rigs - Onsan plant in South Korea - due to downturn in the global oil and gas industry.
The closure Onsan underscores the dire state of the country’s big shipbuilders as dearth of orders as the crude price rout forces international oil companies to cut spending.
“Our ongoing projects will complete in March. From then we do not have a further order to work on, and the operation will stop until we get a new one,” a company spokesman told local media.
But Korean Times quotes a HHI spokesman saying: "The plant will complete its last order in late March, and then it has no more orders to work on ... So, we decided to utilize the facility for other purposes. Under no circumstances will we close the plant."
HHI’s latest project was a $2 billion project building part of the LNG plant for Australia’s Gorgon project.
HHI is likely to use the Onsan yard, which occupies an area of 2.15 million square feet (200,000 square meters), as storage for the shipbuilder's raw materials and equipment. The yard has been used to build floating production storage and offloading, liquefied natural gas plants and other offshore facilities.
Around 60 of the workers from the Onsan yard will be transferred to another shipyard, with the remainder expected to see their contracts terminated, the Korean Times indicated, adding that the other shipyard -- Gunsan -- will handle all future orders for offshore facilities.
South Korea is home to the world’s top three shipbuilders by revenue — HHI, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries.The trio suffered billions of dollars of combined losses - $6.1 billion in 2015 - from failed forays into offshore energy projects.
The offshore oil rigs and production facilities was an area in which they have expanded significantly in recent years in an effort to offset falling orders for commercial ships hit by a supply glut and low freight rates.
According to the South Korean news agency Yonhap, despite being heavily affected by the oil market situations, the country’s largest shipyards, Hyundai, Samsung and Daewoo are still expected to pay bonuses to the employees.
Quoting unnamed sources, Yonhap said the shipyards are looking to boost their employees’ morale, and “are set to pay one-off bonuses to employees, amounting to 100 percent of their basic monthly salaries,“ for the Lunar New Year, falling on February 8.