April 28, 2010
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Home / Issue Archive / 2010 / April #4 / TMK Premium Services Consolidates Its Leadership

№ 4 (April 2010)

TMK Premium Services Consolidates Its Leadership

   Difficult conditions inherent in oil and gas production require quality thread connections in drilling, casing and production pipes. Large Russian production companies are beginning to understand that premium-class threaded joints ensure the high reliability of equipment and are therefore a good solution.

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   During the crisis, oil companies realized that “everything costs money to make well”: demand for premium thread connections is on the rise despite the fact they cost much more than standard joints. OGE discussed the benefits of premium-class thread connections and TMK Premium Services’ two-year path to becoming the industry leader with TMK Premium Services deputy general director Arkady Bykov.

OGE: Arkady, please elaborate on the history of premium-class thread joints. When did the product first appear on the market?
Bykov: The first premium-class thread joints were developed in the 1950s by scientists with the Soviet R&D Institute of Drilling (VNIIBT).
The idea received due attention abroad – while the West was developing its drilling technologies and installing difficult wells, the Soviet Union produced oil from easy-to-recover reserves; the wells were simple to construct and mainly vertical. The first premium thread joints were imported about 20 years ago, and demand from market players has been steadily growing ever since.
At the time, the Volzhsky, Sinarsky and Seversky pipe plants and Taganrog Iron and Steel Works were all separate companies (they joined TMK in 2001–2003); each one started developing premium-class joints independently. This resulted in several thread connections with similar properties. TMK started developing its premium-class thread connections in 1997, and conducted its first field tests in 1999.

OGE: Is it correct to say that due to the high cost, premium-class joints are used mainly by Western companies?
Bykov: This is not entirely true. The arrival of Western companies to Russia did boost the consumption of this product, but even before that it was widely used by Gazprom companies.

OGE: Who are the main suppliers to the domestic market?
Bykov: Two companies – Vallourec Group (France) and Tenaris (Argentina) – supply their products to the Russian thread joints market. But the dominating manufacturer is TMK, represented by TMK Premium Services. We estimate the annual consumption of premium-class pipes in Russia’s oil and gas industry is between 100,000 and 120,000 tons. TMK commands about 75 percent of the market.

OGE: How long did the company take to get such good results?
Bykov: From the date of TMK Premium Services’ creation in 2007 we have been actively engaged in both promoting thread joints and in positioning our proprietary solutions.  2007 marked the beginning of our business growth, which ultimately led to 55 percent growth in market share – from 20 percent in 2007 to 75 percent by 2009.

OGE: What is the advantage of premium-class thread joints compared to the traditional thread connections?
Bykov: When installing U-shaped or horizontal wells, the structural integrity of a string is challenged by compression, stretching and torque forces. Over time, these forces lead to leaks in standard-type connections. This, in turn, led to inter-string flows, the need for higher delivery pressure and higher energy usage, and also results in certain environmental protection issues. The development of premium-class joints targets precisely these problems. The industry has a sufficiently wide range of premium thread connections, and specific types can be easily selected by taking into consideration the maximum stress load in each case.

OGE: How do premium joints benefit the user?
Bykov: Using premium joints cuts energy consumption per production unit, improves well reliability and reduces environmental risks. Quality assurance here is entirely different from QA policies for standard joints, with a much lower rate of defective products. At the very least, 100 tons of premium-class joints can replace 150 tons of standard-grade product.

OGE: What is the average life of a premium-class connection?
Bykov: Whitepapers for pipes with premium thread joints mention at least three make-up and break-out operations for casing pipes and at least nine – for production tubing. Our production withstands at least 10 times for casing pipes and over 30 – for production tubing. In the lab tests we achieved at least 75 make-up and break-out operations for production pipes.

OGE: How did TMK Premium Services manage to capture such a large market share?
Bykov: First of all, because our products are highly competitive with similar foreign joints. We say: here is a domestic manufacturer who offers more flexible payment terms and shorter production and delivery times for products with the same quality. Also, we have mastered the production of supplementary accessories required to complete the string, and started offering service options. TMK was also the first company to start making short finishing nozzles, as well as adapter bushing from one thread connection to another.
In late 2008 we set up a consortium of domestic producers of downhole and wellhead equipment and started offering comprehensive integrated sets of products. This was one of our key competitive advantages, and the one which ensured our rise to the top in relatively short time.

OGE: Did the crisis have an impact on your 2009 business results?
Bykov: Companies retained their interest in premium-class thread connections during the crisis. We took advantage of foreign producers’ yielding their positions and managed to take over the available market share. In 2009, the rate of growth of our market share almost doubled against figures for 2008. This is also due to the growing demand for products with high market value and demand for reliability.

OGE: What companies are your core customers of thread joints?
Bykov: Our products are purchased by Surgutneftegaz, Gazprom, Lukoil, TNK-BP, NOVATEK, Rosneft and Gazprom Neft. Starting in 2007, we have also been operating on the CIS market at large, supplying our products to Uzbekistan and Turkmenistan. This year we plan to enter the global market, shipping our goods to Vietnam, the U.A.E. and Nigeria. There are good chances we can gain a share of the Latin America market in Venezuela, Cuba and Colombia.

OGE: How do your thread joints compare to imported products, price-wise?
Bykov: They are cheaper, considering the measures installed for protection of the domestic market. Abroad, we compete on general terms.
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