11-08-09 On July 29, Samsung Heavy Industries (SHI) announced that Royal Dutch Shell had selected SHI, along with its French consortium partner Technip, as prime contractors for the construction and long-term supply of LNG-FPSOs. A basic contract was signed to confirm this.
Under the contract signed in Paris between Vice Chairman Kim Jing-wan and Executive Vice President of Royal Dutch Shell Matthias Bichsel, SHI will not only be the exclusive supplier to Royal Dutch Shell of large LNG-FPSOs for the next 15 years, but will also receive LNG-FPSO orders that together will be the largest orders in the history of the global shipbuilding industry.

According to the contract, SHI will be the exclusive supplier of large LNG-FPSOs ordered by Royal Dutch Shell PLC for a period of up to 15 years. The two parties will negotiate further in the future on some points of the agreement, such as the price and delivery date of the structures, according to the waters in which the LNG-FPSOs will be stationed.
Industry experts predict that as many as 10 FPSOs priced at $ 5 bn each (total of $ 50 bn) will be ordered.

SHI won this order on the strength of its track record of delivering two FPSOs for oil production purposes to Royal Dutch Shell in 2002, developing the world's first LNG-FPSOs last year, and winning all five orders for ships placed by Royal Dutch Shell up to early this year.
Royal Dutch Shell was created in 1907 when the Royal Dutch Petroleum Company of the Netherlands merged operations with the Shell Transport and Trading Company of the UK. It is the largest energy company in Europe, with $ 458.3 bn (KRW 576 tn) of revenue and net profits of $ 26.5 bn (KRW 33 tn) recorded last year.

Royal Dutch Shell, which is currently engaged in oil exploration and development projects in 34 countries, is expanding its gas exploration and development activities based on its strong business capacity, which was ranked number one by Fortune 500 this year. To this end, the company is strategically placing orders for LNG-FPSOs, and is securing business licenses for off-shore gas field projects.
SHI will come up with a basic design for LNG-FPSOs starting early August in collaboration with Technip, a renowned French engineering company, and will sign a final contract early next year that reflects the design.

An LNG-FPSO structure weighs 200,000 tons, and is 456 meters in length, 74 meters in width, and 100 meters in height. It is priced at $ 5 bn, which is equivalent to the price of 35 ultra-large oil tankers.
The LNG-FPSO structure can store up to 450,000 cm, which is enough LNG to supply Korea for three days. It will produce 3.5 mm tons of natural gas per year from off-shore gas fields near Australia's Northwest coast starting in 2016.

In the last four years, orders for 44 drill ships to develop deep-sea oil fields have been placed, leading the marine plant market. However, as these drill ships were used to discover many oil and gas fields, FPSOs (facilities to produce oil) or LNG-FPSOs (facilities to produce gas) will begin leading the market.
In particular, experts in the industry predict that the market for facilities related to energy production will increase rapidly, as the break-even point for oil field development of major oil companies was $ 50 per barrel in 2008. As the current oil price has surpassed $ 65 per barrel, and is expected to rise over the mid-to-long term, the prospects are even better for energy-production related marine facilities.

In fact, SHI has announced that it is also negotiating with European companies, including Dutch, French, and Norwegian companies, regarding the construction of large FPSOs.
Vice Chairman Kim Jing-wan stated, "Based on our world-leading technology in drill ships construction, we have been able to take the lead in the market for energy-production facilities, such as LNG-FPSOs. We are optimistic that we will achieve good results in future projects whose orders will be placed in the second half of this year, including Australia's Gorgon project and Brazil's Petrobras project."