The Sonangol Project of Daewoo Shipbuilding & Marine Engineering is showing signs of settlement based on an increase in international oil prices.
The Sonangol Project of Daewoo Shipbuilding & Marine Engineering, which holds the key to the shipbuilder’s short-term liquidity problem, is showing signs of settlement based on an increase in international oil prices.
The final deadline of the delivery of the two drillships for the completion of the project was November this year but the Angolan national oil company failed to meet the deadline. However, the two sides recently agreed on payment by installments. The South Korean government and Daewoo Shipbuilding & Marine Engineering are planning to wrap up their negotiations with Sonangol in March next year so that the uncertainties of the project can be eliminated. “Sonangol cannot make the lump-sum payment for practical reasons and Daewoo Shipbuilding & Marine Engineering has to deal with its liquidity problems,” the government explained, adding, “Under the circumstances, they reached an agreement that three split payments can be a solution and the first payment is scheduled for the second half of next year.”
The US$1.4 billion project was signed in 2013 and the initial deadlines were June and July this year. However, the two drillships failed to leave South Korea due to Sonangol’s financial difficulties. The South Korean shipbuilder has yet to receive approximately one trillion won from the Angolan oil company. For the ships to be delivered to the latter, it should prepare a charter regarding oilfield drilling tools. A charter can be defined as a supply contract with a global oil major. Financial companies can estimate Sonangol’s sales and lend money based on the charter. With Sonangol resuming discussions with oil majors based on an increase in oil prices, the South Korean shipbuilder’s probability of getting the money is rising.
Another pending issue is the guarantee to be provided for a financial company to finance Sonangol. The Korea Trade Insurance Corporation and the Norwegian Guarantee Institute for Export Credits (GIEK) were to respectively bear 63% and 37% of the guarantee earlier, but the GIEK pulled out. “We are going to work with another guarantee provider if necessary and maximize the guarantee even if the Korea Trade Insurance Corporation has to provide the guarantee on its own,” the government mentioned.