Falling oil prices and the high value of sterling are indicators of a difficult year ahead for the Belfast shipyard Harland and Wolff, which last week reported pre-tax losses of £1.5 million sterling.

The company, in which Norwegian shipping magnate Mr Fred Olsen is the majority shareholder, made a profit before interest and provisions of £4.1 million for the 12 months to the end of December 1997, compared to £2.1 million the previous year. However, provisions of just over £9 million, combined with interest charges, left the company with a deficit before tax of £1.5 million on a turnover of £178.3 million. This compares with profits of £3 million on a turnover of £118 million in 1996.

The yard has had some success in its new strategy of targeting customers in the offshore oil industry, notably in the construction of the floating production, storage and offloading vessel, the Schiehallion, and the upgrading of submersible oil rigs.

Within the past two weeks, the yard announced it had been awarded a $450 million contract by the oil exploration company Global Marine International to build two deepwater drillships. However, in a joint report to shareholders, the chairman, Mr Olsen, and the chief executive, Mr Per Nielsen, said they were nevertheless facing a difficult year.

"We are now faced with an oil price which has been falling steadily over the past two years," the statement said, "at a much faster pace than technological change can reduce the costs of exploration and production. This has resulted in the differential between the cost of exploration and production, and the selling price of oil, being eroded to such an extent that we are beginning to see cutbacks in oil company capital investment programmes."

The company is also being affected by the economic crisis in the Far East and the ability of shipyards there to undercut them.

"It is appalling to see the Korean shipyards once again creating massive problems in both the shipbuilding and shipping industries by offering prices and rates which are not based on commercial reality," the statement said.

"It must be demanded that any support from the International Monetary Fund to those countries in need be followed by export restrictions, in such a way that artificially-lowered unit prices not based on performance improvements, do not flood and destroy global markets."