Go to content

Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

Offshore Platform Industry: Changes and Opportunities

Offshore Platform Industry: Changes and Opportunities

BAE Young-Il

Jan. 25, 2013

Download Offshore Platform Industry: Changes and Opportunities PDF email Print

Originally released on December 19, 2012

With high-running oil prices prompting deep water oil development, the offshore platform business is likely to grow a yearly 6.7% by 2030. Nonetheless, close ties between international oil companies (IOCs) and specialized developers with a long track record impose high entry barriers to new platform builders.

Recently, there have been three major changes in the industry. First, resource development has advanced into deeper water and farther off the coast, and covers not only oil but also minerals. Second, demand for offshore platforms in extreme environments like the Arctic Ocean and North Sea requires significantly enhanced quality standards for offshore platforms. This means shipbuilders without proven capabilities cannot enter the market and explains why Korean shipbuilders have been faring well recently. Third, national oil companies (NOCs) of countries with sea oil fields are rising. Countries in South America, Africa and Southeast Asia grant monopoly rights to their own NOCs in developing oil wells near their coastlines. These NOCs prefer turnkey contracts for offshore platforms since, compared to IOCs, they lack technological and managerial capabilities, and apply stricter localization regulations named “local contents rules” to foster domestic industries.

Responding to these changes, global offshore companies are transforming themselves from specialized business to general planning business connecting functions across the value chain . In the past, global offshore companies independently signed deals with IOCs based on their specialties, but now they actively pursue collaboration through mergers and acquisitions or equity holdings to complement their shortcomings. Collaboration is actively taking place between industry leaders as well as partnerships with customers. Also, to meet the emerging market countries' localization regulations, platform companies are setting up production hubs near customers to secure local projects.

Recent changes in the offshore platform business provide a golden opportunity for Korean shipbuilders with world class manufacturing ability. Korean shipbuilders need to build a new business model based on engineering and manufacturing capabilities by reinforcing their front-end engineering design (FEED) capability and track record if they want to take the market lead. For this, they need to utilize existing capabilities in areas like ship design and manufacturing, steel equipment and materials, on-shore engineering and construction, and information technologies, and quickly obtain human resources with FEED capability. Businesses, universities and R&D institutions should work together to nurture human resources with offshore platform expertise, develop basic technologies and establish a sound environment.

For full text (7 pages), click the PDF icon on top.

Go to list