South Korean industrial engineering companies that won billions of dollars of work in the GCC last year are increasingly forming partnerships with European and Japanese peers to bid for projects in a fiercely competitive market, contractors say. The alliances underscore the central role the Koreans now play in a regional market that was mostly the province of Japanese and European firms only two years ago.
Korean companies won nearly all of the major UAE energy contracts awarded last year, including those for a major refinery and chemical plants in Ruwais and the country's first nuclear reactors, and more contracts in Qatar and Saudi Arabia. Hyundai Engineering and Construction yesterday signed a US$1.1 billion (Dh4.04bn) deal with Kuwait to construct a port near the border with Iraq. Samsung Engineering, a major Korean contractor, last week signed a $1.2bn contract with Borouge, the Abu Dhabi plastics company, to build a production line in partnership with the Italian contractor Tecnimont.
Samsung saw cost advantages in partnerships and also did not want to ruffle feathers in the contracting market, said Gunther Pergher, the company's general manager for MENA marketing and planning. "We're not here to create confrontation," Mr Pergher said. "We want to keep up neighbourly relationships." Samsung formed a separate partnership last year with Chiyoda, a Japanese contractor, and won an $850 million contract to build a key piece of the Jubail refinery in Saudi Arabia.
The contracts won by partnerships were only a small part of a bumper year for South Korea that saw SK Engineering, Samsung Engineering and GS Engineering and Construction supplant Technip, Tecnimont and other European firms as the top three recipients of contracts for engineering, procurement and construction across the region. Keith Roberts, the chief financial officer of the UK engineering firm Petrofac, told analysts last month his company was open to more partnerships with Korean firms in an increasingly competitive market. Petrofac partnered with GS Engineering last summer to win a contract to build a gas-processing train at Ruwais.
"I think it's fair to say that there's no immediate sign" of competition easing, Mr Roberts said. "From time to time we're partnering with Koreans." Korean competition is "not new", he said, but "I think they're now more active in more countries in the Middle East". Petrofac, Mr Roberts said, was confident it could win its "fair share" of business against Korean competition. Western contractors privately admit the Korean companies have underbid them on nearly every major industrial project in the past year.
But Korean companies were anxious to show they were not simply offering the cheapest services, Mr Gunther said. "Our competitors have access to the same supply chain as we do," he said. "It's not an issue of cheapness. It's how tightly you manage the project and your personal relationships with the clients." email@example.com