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Wed, 04/03/2024 - 08:39
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S. Korean firms win US$7.2 bln gas plant deal in Saudi Arabia

SEOUL, April 3 (Yonhap) -- Samsung E&A Co. and GS Engineering & Construction Corp. (GS E&C) have won a combined US$7.2 billion deal to expand a gas plant in Saudi Arabia, the biggest order for South Korean companies in the Middle Eastern country, the presidential office said Wednesday.

The Fadhili Gas Increment Program is a project run by Saudi Arabia's state oil giant, Saudi Aramco, to expand the capacity of an existing gas plant in an oilfield some 80 kilometers away from the city of Jubail in the country's east.

The deal is the result of an agreement reached during President Yoon Suk Yeol's state visit to Saudi Arabia last October to strengthen cooperation between the two countries in construction and infrastructure, the presidential office said in a press release.

It is also the third-largest overseas construction order won by a South Korean firm, after the $19.1 billion Barakah nuclear power plant project in the United Arab Emirates and the $7.7 billion Bismayah New City project in Iraq, it said.

Samsung E&A said in a statement that it had clinched a $6 billion deal to construct two gas treatment facilities as part of the plant expansion program.

It marks the single-largest contract in the company's history and the largest-ever deal that South Korean builders have obtained from the Middle Eastern country.

The completion of the project would raise the plant's daily capacity to 38 million MMSCFD (million standard cubic feet per day) from the current 25 million MMSCFD, it added.

Samsung E&A is currently participating in two gas treatment and storage facility projects in Saudi Arabia, which has been investing big in gas plants in a bid to boost gas production.

In a separate regulatory filing, GS E&C said it had bagged a $1.22 billion deal to build a sulfur recovery unit at the plant, which is expected to take about 41 months.

The latest mega deal comes as a boon to South Korean construction companies struggling to labor through a sluggish domestic business, raising hopes they could bask in more orders from the Middle East.

The value of the contract accounts for about one-fifth of last year's $33 billion in total overseas orders obtained by South Korean builders.

As of Tuesday, this year their aggregate overseas orders came to $12.72 billion, more than double the $6.11 billion during the same period a year earlier.

Stung by a slumping property business in Asia's fourth-largest economy, local construction companies have been shifting their sights to overseas markets as Middle Eastern countries are expected to place more plant orders on the back of rising oil prices.

In a report issued in December last year, the Korea Research Center for Overseas Construction predicted construction projects in the Middle East to expand 3.3 percent in 2024 from a year earlier.

"There is a possibility that Middle Eastern countries could inject their huge profits from high oil and gas prices into the construction center," the think tank said.

Capitalizing on a construction boom in the region, large and smaller South Korean builders have clinched orders from Middle Eastern countries in recent months.

In June last year, Hyundai Engineering & Construction Co. signed a $5 billion deal with Aramco to build a mega petrochemical plant in the east of the country.

In light of brisk orders from the Middle East, industry sources said, South Korea is on course to achieve its 2024 target of $40 billion in overseas construction orders.