Hyundai Heavy Industries is set to consolidate its footing in Saudi Arabia after forging a partnership with oil giant Saudi Aramco this week, sources said Friday.

The world’s top shipbuilder concluded a memorandum of understanding with the Saudi oil firm to cooperate on business development opportunities in the Middle East country on Wednesday.

The comprehensive cooperation framework covers areas such as engineering, procurement and construction, downstream and the development of a casting and forging facility.

‘The partnership between the two industrial behemoths not only means a great opportunity to enhance Korea’s shipbuilding and EPC businesses, but also extends Hyundai Groups’ contribution to the kingdom stretching back to the 1970s when it was awarded a contract to develop the Jubail Port,” said Chung Ki-sun, senior vice president of HHI Corporate Planning, at the MOU signing ceremony held in Dhahran, Saudi Arabia.

The Jubail Port project was secured by Chung Ju-yung, late founder of the Hyundai Group and the executive’s grandfather, 39 years ago.

The strategic alliance between the two companies highlights Hyundai’s participation in the development of a maritime yard in the oil-rich country which Aramco and state-run shipping firm Bahri are collaborating.

According to Aramco’s statement, the yard will leverage the companies’ expanding offshore business to accelerate localization efforts of maritime industry and its associated supply chain.

‘The alliance is a milestone for HHI to expand its foothold in the Middle East as well as to secure a production base in Saudi Arabia,” an HHI official said.

With the deal, market insiders expect that HHI will get priority in winning orders placed by Saudi firms and create potential additional revenue sources from the yard.

The MOU also covers the advancement of maritime diesel engine manufacturing which could give an impetus to the export of HHI’s high-output Himsen engine, the company said.

The move came as the world’s leading shipbuilder reported operating losses of 897.6 billion won ($771.3 million) in the third quarter.

The company has remained in the red for eight consecutive quarters since fourth quarter 2013 due to its failed foray into deep-sea oil rigs and the deteriorating market conditions.

According to the two firms, the partnership discussion was initiated when Saudi Aramco’s board of directors visited HHI’s Ulsan complex in April 2015.

By Park Han-na (hnpark@heraldcorp.com)