December 5, 2008
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Home / Issue Archive / 2008 / April #4 / Russian Pipe Makers Implement New Large-Scale Projects

№ 4 (April 2008)

Russian Pipe Makers Implement New Large-Scale Projects

Last year 8.7 million tons of pipes were produced in Russia. All main market segments saw a production increase over 2006 levels. Striving to keep pace, domestic companies are planning several large-scale projects. Work on some of them has already begun

By Vladimir Shlychkov

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The focus of the strategic investment program of the Taganrog Metallurgical Works, part of TMK (Pipe Metallurgical Company), is developing the production of seamless pipes. By 2010 it plans to increase the production of hi-tech threaded oil and gas pipes by more than 60 percent.

At the end of last year, TAGMET (Taganrog Metallurgical Works) started construction of a tube-rolling complex with a Premium Quality Finishing (PQF) continuous rolling mill and an annual output of 600,000 tons of hi-tech pipes. Completion of this project will enable the production of drill, casing, oil line and oil well pipes with diameters of 73 to 273 mm, with improved performance properties in accordance with international standards. The German SMS Меег is responsible for developing the mill construction project and the manufacture and supply of equipment. The launching of the complex is scheduled for 2008.
At the end of last year, TMK announced it had started producing specialized corrosion-resistant seamless line pipes, intended to transport gas from wells in aggressive natural environments.

This new hi-tech product was designed by the TMK scientific and technical center for the Astrakhanskoye gas condensate field with complex geology, high formation pressure, and saturation of gas with corrosive and toxic components. At the Sinarsky Pipe Plant, which is part of the company, a lot of seamless line pipes were produced which can resist destructive substances of the fields. They passed a complete set of bench and field tests which showed them to be suitable for oil, gas, and gas-condensate fields with significant contents of hydrogen sulfide and carbon dioxide. Technical requirements for production were agreed upon with Gazprom, which received an opportunity to substitute import products.

According to Konstantin Semerikov, General Director of TMK, “The production of pipes intended for construction of wells on gas-condensate fields with aggressive hydrosulfuric environments is a new and very promising direction for innovative activity. Such pipe products by TMK will completely satisfy Gazprom’s and other oil and gas producing companies’ needs.”

Collaboration between technologists of two companies of Severstal, Cherepovets Metallurgical Plant and Izhora Pipe Plant, along the whole chain including a converter process at the Cherepovets Plant, sheet-rolling shop No. 3 of the integrated iron-and-steel works, and the Izhora Pipe Plant, enabled production of skelp steel for such large projects as SEG and VSTO.

In 2008, plans include the commercial development of the manufacture of skelp and K65 category pipes for the Bovanenkovo – Ukhta project. In Russia, this will be the first main to use such pipes.

In 2008–2009 the Vyksunsky Metallurgical Plant will invest 2.3 billion rubles in mill modernization at the Electric Welding Pipe Shop No. 3, which produces oil-and-gas pipes with diameters of 203-530 mm.

The project includes plans to install an inlet part of a SMS Meer (Germany) mill, a Nakata (Japan) mill for preliminary molding, a pipe-cutting machine, a Linsinger (Austria) edge-milling machine and other new equipment, as well as upgrading the processing line. By mid-2008, contractors will be named for the building and construction work. Equipment delivery will begin in February of next year, and start-up is planned for the middle of 2009.

After the modernization, the mill will produce pipes of the H70 (K60) strength class with wall thickness up to 12.7 mm and diameter of 203 to 530 mm, including corrosion- and cold-resistant pipes. Additionally, Vyksunsky Metallurgical Plant will for the first time produce pipes with rectangular and square sections ranging from 160 x 160 to 400 x 400 mm, which are popular in the construction market. At present the plant produces shaped tubes with sections not more than 80 x 80 mm.

Equipment modernization, expansion of the product line, and improvement of qualitative characteristics will allow pipe production to be doubled at the sheet-rolling shop No. 3, having increased it up to 700,000 tons.

Completion of the project will strengthen OMK's position in the dynamic emerging pipe market for mains and enable it to satisfy the increasing requirements of leading companies of the fuel and energy complex on durability, corrosion resistance and low temperatures.

Last year OMK started the “Mill 5000” project at the Vyksunsky Metallurgical Plant with an annual output of 1.2 million tons. The German SMS Demag was chosen to supply equipment. The amount of the transaction is undisclosed.
In December 2007 OMK signed a package job contract with Strabag Company (a subsidiary of the Strabag SE concern) for construction at the cost of 334 million euros.

Investment in the construction program is estimated at 45 billion rubles, from which 30-35 percent will be the company’s own funds. The rest will be borrowed.
The “5000” mill is scheduled to begin operation in the first quarter of 2010. Today in Russia there is only one “5000” mill operating, at the Izhora Pipe Plant. That number is projected to grow to five or six by 2010–2011.

Another large-scale project of OMK at the Vyksunsky Metallurgical Plant concerns the production of oil-and-gas mean diameter pipes for export according to the API-5L American Standard. This year, it plans to produce about 20,000 tons with diameter 508 mm and wall thickness up to 9.8 mm. Production of pipes of diameter 406.4 mm is planned to start in May 2008.

Total investment in the project will be about 155 million rubles. The main equipment and instruments to produce 5088 mm-diameter pipes were manufactured and delivered by a subsidiary of the Vyksunsky Metallurgical Plant, VMZ-TECHNO, and the German firm S+C MARKER GmbH. The Electrostal Heavy Engineering Works and S+C MARKER GmbH were the principal suppliers of the equipment and instruments for producing 406.4 mm-diameter pipes.
“The project is extending facilities of the Vyksunsky Metallurgical Plant to produce pipes according to the API-5L standard and allow the company to enter new markets,” Vladimir Kochetkov, CEO of Vyksunsky Metallurgical Plant, noted. “We also see serious prospects in the Middle East, Europe and other regions.”
The ChTPZ Group started constructing a steel-producing complex at the Pervouralsky Novotrubny Works and a complex to produce large-diameter pipes (up to 1,420 mm inclusive) at the Chelyabinsk Tube Rolling Plant. The latest project is closely related to plans to construct a “5000” mill in Magnitogorsk.

Protecting the Local Market

Importing pipes from the People’s Republic of China has rapidly accelerated. In 2007, deliveries of Chinese pipes to Russia increased by 8.5 times over the previous year. In particular, the import of Chinese oil well pipes increased 4.5 times, corrosion-proof pipes 4 times, and conventional pipes 9.5 times. As a result, the total losses of Russian companies in the pipe market were $360 million. Besides, the prospective loss to the federal budget from the fivefold understating of the customs value of corrosion-proof pipes by Chinese suppliers in the sector of field pipes will increase from 27.4 million rubles in 2006 to 220 million rubles in 2007. Understating the customs value of pipes delivered to Russia by China breaches the regulations of the World Trade Organization, to which the People’s Republic of China has belonged since 2001.
At the end of January 2008, there were negotiations in Moscow on voluntary self-restriction of deliveries of Chinese pipes to the Russian Federation in accordance to traditional trade flows (average annual numbers for the last 3 years).

The Russian delegation, headed by the director of the Pipe Industry Development Fund, Alexander Deineko, included top managers of the TMK companies, ChTPZ Group, OMK, and representatives of the Ministry for Economic Development and Trade and the Ministry of Industry and Energy. From China, representatives of the National Pipe Association (СSPA), the Chinese Iron and Steel Association (CISA), Tianjin Steel Tube Group, Changbao Tube Corp. and Hengyang Steel Tube Group participated in the meeting.

The inefficiency of Chinese measures to restrict pipe export to Russia in the second half of 2007 was noted. Thus, the rate of increase of deliveries of Chinese pipes in this period compared to the first half of 2007 has only grown, reaching 477.8 percent (up to 244,200 tons from 51,100 tons in the first half of the year). For large-diameter pipes, growth was 992 percent (up to 118,000 tons from 11,900.). For oil well pipes the figure was 294.4 percent (to 39,600 tons from 13,500), and for oil-and-gas and hot-deformed conventional pipes – 393.4 percent (to 15,000 tons from 3,800). According to estimates of the Pipe Industry Development Fund, in 2007 the damage to Russian pipe manufacturers connected with the sharply increased import of Chinese pipe products to Russia was $360 million.

The next round of negotiations will be in Beijing in April.

According to customs statistics, in 2007 the volume of deliveries of pipe products to the Russian Federation exceeded 1.5 million tons, a growth of 15 percent over the previous year.

The portion of the oil and gas assortment reached 58.5 percent, and the increase in the import of these products over 2006 levels was 20.5 percent.
Deliveries of drill-pipes more than doubled. Well pipe deliveries increased by a factor of 1.43, and casing pipes by 1.3. As a whole, deliveries of quality steel pipes (K60) grew 3.2 times.

December deliveries of the oil and gas assortment grew 1.54 times over November levels, and the deliveries of casing and drill-pipes doubled.
For the whole assortment of pipe products delivered in 2007, Ukraine (57.9 percent) was an obvious leader among importers. China came in second (15.7 percent) and Germany third (11.5 percent).

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