DSME to resume US$2.7b Kazakhstan oil facility project

[THE INVESTOR] After two years of deadlock, Daewoo Shipbuilding and Marine Engineering is expected to resume the suspended construction of a crude oil production facility in Kazakhstan within the year.

The company said on July 18 that it has recently received the green light to resume the Kazakhstan project, following a new investment decision made by shareholders of Tengizchevvroil, the operator of the US$36.8 million Tengiz oil field, the largest investment by an oil company since 2014.

Tengizchevroil is a joint venture owned 50 percent by Chevron, 25 percent by ExxonMobil, 20 percent by KazMunaiGas, Kazakhstan’s state oil company, and 5 percent by Lukoil of Russia. 

The Korean builder won a US$2.7 billion won deal in 2014 to upgrade the oil production facility there, including the refinery complex. But the plunge in crude oil prices has delayed related investments and the construction.

DSME said it will start the construction of the facility at its Okpo shipyard on Geoje Island and its subsidiary Shihan Machinery also will deliver some of the orders by 2020.

Once the project is complete, the current oil production capacity of 550,000 barrels per day is expected to soar to 700,000 barrels.

The company will receive a 150 billion won (US$ 132.1 million) advance payment for the project, which will help the financially struggling DSME to secure some liquidity.

By Ahn Sung-mi (sahn@heraldcorp.com">sahn@heraldcorp.com)