Pertamina nominates Hyundai to build tankers

Pertamina nominates Hyundai to build tankers

Dow Jones, Singapore

Indonesia's state-owned oil and gas company Pertamina has nominated South Korea's Hyundai Heavy Industries Co. to build two very large crude carriers, or VLCCs, a Pertamina spokesman said Thursday.

Hyundai's offer price of US$65 million for each tanker was the lowest Pertamina received via a tender seeking construction of 12 new tankers, the spokesman said.

Pertamina estimates that it will spend approximately $300 million for the program that calls for the delivery of 12 tankers ranging from 3,500 deadweight tons, or dwt, to 260,000 dwt in size.

The order for two of the smallest tankers will likely be awarded to local shipyards - PT Koja Bahari and PT Nanindah, said the Pertamina spokesman.

The award of the VLCCs order to Hyundai Heavy is pending final approval from the Indonesian government, said the Pertamina spokesman.

So far, only Hyundai Heavy and the two Indonesian shipyards have been nominated to build the two largest and the two smallest tankers sought in the tender, he added.

"We are seriously discussing with Pertamina," said an official from Hyundai.

Hyundai Mipo Dockyard Co. is also in the running for the construction of three 30,000-dwt tankers, he said.

In addition to South Korean shipyards, shipbuilders in Japan and China are also vying for Pertamina's tanker order.

Japan's Hitachi Zosen Corp. offered to build the two VLCCs at $71 million each, said the spokesman. Another South Korean company, Samsung Heavy Industries Co., came in third, with its $72.5 million offer, he added.

While the order for four out of 12 tankers are close to being finalized, the order for the remaining eight tankers may take some time to be finalized because of politics.

Indonesia's Trade and Industry Minister and State Enterprises Minister are rooting for domestic shipyards, which are hungry for business, to be awarded orders for smaller tankers.

But Indonesian shipyards lag their counterparts in North Asia in technology, efficiency and price competitiveness, shipping sources said. Japan, South Korea and China are the world's leading shipbuilders.

Indonesia has no capacity, nor track record in the construction of VLCCs, making the award of two units to Hyundai much easier.

But interference from local politicians is preventing Pertamina from swiftly awarding the orders in accordance with standard international tender procedures.

"We just want the best price," said the spokesman, adding Pertamina doesn't want to bear "the inefficiencies of local shipyards."

So far, South Korean and Chinese shipyards have submitted the lowest prices for the remaining eight tankers, but Indonesia's PT PAL and its affiliate PT Nanindah are poised to win at least a couple of orders.

Hyundai Mipo submitted the lowest offer to build two 30,000- dwt tankers at $23.16 million, while PT PAL will likely be awarded the contract to build one unit at $25.2 million, said the Pertamina spokesman.

China's Shanghaiguan Shipyard offered the lowest price for the construction of two 17,500-dwt tankers, at $15.9 million each, he added.

Three 6,500-dwt tankers may be split between South Korea's Shinyoung and PT Nanindah. It has been proposed that Shinyoung builds two 6,500-dwt tankers at $8.1 million each, while Nanindah builds the third for $9.8 million, he said.

PT PAL was keen to build the 17,500-dwt tankers, but its price of $19.7 million was $3.8 million higher than the Chinese shipyard's offer, said the Pertamina spokesman.