South Korean constructors detect foreign LNG projects as new cash source

In the first half of 2020, reliance on the housing market increased by nearly 60 percent 

Due to the South Korean government’s strict regulations to control housing prices, construction firms have been contemplating foreign LNG projects as a new cash source to lower their dependence on the domestic real estate market, reported The Korea Times.  

As stated by the International Contractors Association of Korea, 359 builders won 567 contracts valued at USD35.1 billion across 98 countries in 2020. This surge of 57 percent compared to 2019 is partly due to the recovery of oil prices in order to attract large-scale orders from the Middle East.  

The association anticipates similar volumes this year, adding that “orders from oil-producing firms may decline if talks over production cuts fail and oil prices plunge further.”  

Further dips in oil price may draw out domestic builders’ profitability, as industrial facilities account for around 60 percent of such builders’ overseas projects.  

Korean buildings have continuously sought-after overseas projects, as their main revenue stream, the domestic housing market has slowed down as a result of the government’s efforts to regulate housing prices.  

More: South Korea foreign ownership increased by 1.2% in first half of 2020

Since oil prices stayed low in the first half of 2020, their reliance on the housing market jumped by almost a 60 percent average among the top five construction firms.  

As of December, Daewoo E&C landed a USD456 million deal for the Mozambique LNG Area 1 project.  

Industry officials mentioned that several large-scale gas projects are still planned for this year. Korean builders are striving for these contracts, so LNG projects are expected to be an important revenue stream.