For three consecutive years with “zero orders” and mounting losses, South Korean shipbuilding giant Hanwha Ocean has decided to comprehensively restructure its offshore equipment-related business segments.
It is reported that Hanwha Ocean will restructure its Offshore Business Unit (OBU) and Energy & Infrastructure (E&I) Unit. The Offshore Business Unit will absorb and merge the Energy & Infrastructure Unit, reorganizing into the Energy Plant Unit (EPU).
Hanwha Ocean’s Offshore Business Unit is primarily responsible for manufacturing offshore plant equipment such as FPSOs (Floating Production Storage and Offloading units) and FLNGs (Floating Liquefied Natural Gas production units), as well as offshore structures and offshore wind turbine installation vessels (WTIVs). The Energy & Infrastructure Unit was established after the Hanwha Group’s acquisition of the former Daewoo Shipbuilding & Marine Engineering, integrating the group’s plant and offshore wind power functions. It has long been responsible for onshore plant projects like refineries and power stations, as well as offshore wind farm development, primarily focusing on energy transition and renewable energy.
It is understood that after the integration of the two units, the organizational structure will be adjusted. The newly established Energy Plant Unit will be led by Philippe Levy, the current head of the Offshore Business Unit. Philippe Levy is the former President of the Americas region for Dutch offshore oil and gas service provider SBM Offshore, hired by Hanwha Ocean in April 2024 to strengthen the competitiveness of its offshore business.
To re-enter the global offshore equipment market, Hanwha Ocean has been promoting strategic transformation in its offshore business in recent years. The goal of its Offshore Business Unit is to transform into an EPCIO (Engineering, Procurement, Construction, Installation, and Operation) solution provider for various floating offshore equipment like FPSOs and FLNGs, as well as marine renewable energy-related businesses. Concurrently, Hanwha Ocean acquired Singaporean offshore equipment manufacturer Dyna-Mac last year, renaming it Hanwha Ocean Singapore this year, and is focusing efforts on strengthening its offshore business capabilities.
To accelerate its global offshore equipment market layout, Hanwha Ocean also established several overseas subsidiaries in the third quarter of last year, including two in the Cayman Islands primarily engaged in the drilling business, in an attempt to expand global market share. In November 2024, Hanwha Ocean held an opening ceremony for its Global Project Center (GPC) in Amsterdam, Netherlands. This center is Hanwha Ocean’s first offshore business base in Europe and will be responsible for marine engineering and project management. Hanwha Ocean stated that establishing a base in Amsterdam, which hosts design companies for offshore projects like FPSOs, is beneficial for recruiting relevant local professionals to actively respond to the expansion of the offshore market.
However, both the Offshore Business Unit and the Energy & Infrastructure Unit face the dilemma of insufficient orders. Particularly for the Offshore Business Unit, since Hanwha Ocean’s official establishment in May 2023, new orders for core offshore equipment like large FPSOs have essentially been halted. This year’s highly anticipated Petrobras FPSO bidding project was also canceled due to the ordering party’s insufficient funds, further extending Hanwha Ocean’s offshore order drought.
In terms of performance, the cumulative losses of Hanwha Ocean’s Offshore Business Unit and Energy & Infrastructure Unit this year have reached 77.2 billion won. Among them, due to sluggish orders, the Offshore Business Unit’s third-quarter operating revenue plummeted 64% quarter-on-quarter to 102.4 billion won (approximately 500 million RMB). Combined with cost pressures including one-time expenses related to the fatal accident on September 3rd where a Brazilian supervisor fell overboard from the Petrobras FPSO “P-79”, the unit alone incurred a loss of 48.1 billion won (approximately 236 million RMB) in Q3. Meanwhile, the Energy & Infrastructure Unit has suffered losses for four consecutive quarters, with cumulative losses in the first three quarters of this year reaching 31.5 billion won (approximately 154 million RMB).
The Korean industry is watching whether this merger of Hanwha Ocean’s two major units can become an opportunity to alleviate the structural burden of its offshore equipment business—a burden that has existed since the Daewoo Shipbuilding & Marine Engineering era. From the late 2000s to the early 2010s, Daewoo Shipbuilding & Marine Engineering secured over $10 billion in annual offshore equipment orders on average. However, projects signed during the boom period were hit by the oil price crash in 2014, plunging the company into difficulties and causing losses in the trillions of won. Since then, the company has gradually reduced the proportion of its offshore equipment business from a risk management perspective.
Hanwha Ocean’s goal is to improve decision-making efficiency and operational effectiveness by integrating plant-related units and streamlining similar and overlapping businesses. It is reported that there is an internal view within the company that there were many inefficiencies in the coordination process between the two previous units.
A relevant person in the Korean industry stated: “The construction of offshore wind turbine installation vessels and the development of wind farms are essentially the front-end and back-end engineering of the same business. There are also similarities in the design, procurement, and construction methods between offshore equipment and onshore plants. As loss-making units are not suitable for external sale, Hanwha Ocean has taken measures to revitalize its stagnant plant business through organizational restructuring.”
It is reported that changes in the industry development environment have also driven Hanwha Ocean’s organizational consolidation process. The global plant market, which had been continuously shrinking, has recently shown partial recovery due to increased energy demand driven by the proliferation of artificial intelligence (AI). Simultaneously, thanks to policy support from various governments, orders for offshore wind turbine installation vessels are also increasing.
However, some Korean industry insiders point out that Hanwha Ocean, which has been stagnant in the plant business for a long time, will find it difficult to restore order-taking capabilities and improve profitability in the short term.
Yeom Gyeong-ah, Chief Researcher at Shinyoung Securities, said: “After the oil price crash, suppressed plant investments for nearly a decade are showing signs of partial recovery. However, the decision-making cycle for energy development projects is long, so Hanwha Ocean’s performance in this business area is not expected to improve significantly in the short term. Offshore equipment essentially derives from oil and gas projects like onshore plants, so merging the two units is a reasonable choice. However, Hanwha Ocean has not demonstrated outstanding competitiveness in offshore and onshore plant fields. The ultimate effectiveness of the restructuring and integration depends on the actual pace of order accumulation. The plant business involves many variables, such as change orders (design change costs), making profitability difficult to predict. To truly revitalize the business, securing a continuous and stable order volume is essential. The key lies in how many related business orders Hanwha Ocean can secure after the merger of the two units and build a sustainable operational business model.”
