Hanwha Ocean is overhauling its offshore plant business, which has seen no new orders for three years. As losses in the 77 billion won range accumulated this year in the two institutional sectors that have respectively handled offshore facilities and onshore plants and wind farms, it created a new Energy Plant institutional sector by combining capabilities. By unifying the entire process from plant design to procurement and construction, expectations are that it will improve operational efficiency and speed up the normalization of the shrunken offshore plant business.
◇ Integrating offshore, onshore plants and wind power… Overhauling underperforming business
According to the industry on the 18th, Hanwha Ocean this month carried out an organizational reshuffle to reorganize the existing offshore business unit (OBU·Offshore Business Unit) by absorbing and integrating the E&I (Energy & Infrastructure) business unit into the Energy Plant institutional sector (EPU·Energy Plant Unit).
The offshore business unit was the organization that built at-sea facilities such as offshore plants (FPSO·floating production, storage and offloading), offshore structures, and wind turbine installation vessels (WTIV). The E&I business unit was established after Hanwha Group acquired Daewoo Shipbuilding & Marine Engineering, transferring the group's plant and offshore wind functions. It has been responsible for onshore plants such as refineries and power plants and for developing offshore wind farms.
The EPU institutional sector, which combines the two organizations into one, is led by President Philippe Levy, the former head of the offshore business unit and an external hire last year to strengthen Hanwha Ocean's offshore plant competitiveness.
Both business units are experiencing an order drought. Since Hanwha Ocean officially launched in May 2023, newbuild contracts for key offshore facilities such as large FPSOs have effectively dried up. The order gap lengthened further this year when the FPSO tender by Brazil's state-run oil company Petrobras, which had been a focus of expectations, was scrapped by the client citing a lack of economic feasibility.
The offshore business unit and the E&I business unit have posted a combined loss of 77.2 billion won just this year. Due to sluggish orders, offshore business revenue in the third quarter plunged 64% from the previous quarter to 102.4 billion won, and with added cost burdens such as one-off expenses related to an FPSO accident, it recorded a loss of 48.1 billion won in the third quarter alone. The E&I business unit, which has been in the red for four consecutive quarters, also saw its cumulative third-quarter loss reach 31.5 billion won.
The industry is watching whether Hanwha Ocean's integration will serve as an opportunity to resolve the structural burdens of the offshore plant business that have persisted since the Daewoo Shipbuilding & Marine Engineering era. Daewoo Shipbuilding & Marine Engineering recorded more than $10 billion (about 14 trillion won) in annual offshore plant orders from the late 2000s to the early 2010s. However, projects won during the boom turned difficult in tandem with the oil price crash in 2014, resulting in trillion-won-level losses. Since then, the company has reduced the proportion of offshore plants as part of risk management.
◇ The market is stirring… A test of securing workloads
Hanwha Ocean has set a strategy to streamline operations by consolidating similar and overlapping tasks through the integration of its plant businesses and speeding up decision-making. Internally, there had been assessments that there was no small amount of inefficiency in the coordination process between the two institutional sectors.
An industry official said, "Building wind turbine installation vessels and developing wind farms are essentially the front and back processes of the same business, and offshore plants and onshore plants have similar design, procurement and construction methods," adding, "Since it is not easy to sell loss-making institutional sectors externally, it appears to be a move to revive the sluggish plant business through organizational restructuring."
It is also understood that changes in market conditions influenced Hanwha Ocean's acceleration of organizational reorganization. The previously depressed global plant market has partially revived recently due to increased energy demand driven by the spread of artificial intelligence (AI). Orders for wind turbine installation vessels are also increasing, aided by government support in various countries.
However, some point out that it will not be easy for Hanwha Ocean, which has faltered in the plant market, to achieve a rapid recovery in orders and improved profitability in a short period.
Senior researcher Eom Gyeong-a at Shinyoung Securities said, "There are signs that plant investment, which had been suppressed for nearly 10 years since the oil price plunge, is partially reviving, but energy development projects take a long time to reach decisions, so it is not a structure where results improve in the short term," adding, "Offshore plants are essentially work derived from the same oil and gas projects as onshore plants, so combining the two areas is a rational choice, but Hanwha Ocean has not shown clear competitiveness in either offshore or onshore plants, so we have to see how quickly actual orders will accumulate."
Eom said, "The plant business has many variables, such as change orders (design change expense), making it difficult to forecast profitability, and to get the business fully up and running, you need to secure steady volumes," adding, "After the business integration, the key is how much workload Hanwha Ocean can secure to make it a 'consistently running business.'"