In 2013, the Russian pipe market was 4% up year-on-year mainly driven by the growing demand from oil and gas companies. We maintained our leadership position on the Russian steel pipe market with a share of 25.2% at 2013 year-end.
Our priority remains to produce and sell high-tech and high value-added products, mostly seamless OCTG, which made up 35% in the total sales of our Russian entities in 2013.
Oil and gas pipe and premium products
In 2013, Russia increased the production of oil with gas condensate by 1% year-on-year to over 523 mln tonnes. Drilling grew by 5.5% to 21,657 km over the same period.
The depletion of conventional oil and gas fields has boosted horizontal and directional drilling at the expense of vertical wells. In 2013, horizontal drilling increased dramatically by 62% year-on-year. Horizontal drilling reached 21% of the total footage drilled at year-end and 26% in the last four months. Average well depth continued to grow as well: by 2% for horizontal wells and by 3.6% for both vertical and horizontal production wells.
Oil and gas production is shifting to regions with adverse climate and geological conditions. In late 2012 and during 2013, the Russian government took steps to promote the production of hard-to-reach oil, along with the production of oil in Eastern Siberia, the Yamal-Nenets Autonomous Area, the Arctic shelf, the Sea of Okhotsk, the Caspian region, etc. The favourable tax regime, including export duty and mineral extraction tax benefits, is another driver behind the increased drilling.
Extensive drilling ensured strong demand for oil country tubular goods and resulted in higher consumption of seamless OCTG in Russia (up 14% in 2013 vs 2012).
To meet the demand of oil and gas companies which have to deal with permafrost, aggressive environments and extreme depths to develop wells and produce hydrocarbons, we develop new types of premium products and boost their output.
In 2013, TMK’s shipments of premium connection pipe gained 20.7% year-on-year with 2010–2013 compound annual growth rate of 20.3% p.a.
In 2013, we carried out a number of important projects in the premium segment.
We ran casing pipe with ТМК PF premium connections in the horizontal well that goes under the bed of the Karsk Sea at NOVATEK’s Yurkharovskoye field. A column of casing pipe was run into the well. The total length of the run reached 7,000 metres. This is at present the longest well made with ТМК premium casing pipe. The Yurkharovskoye oil and gas condensate field is located in the Yamal-Nenets Autonomous Area in the south-eastern part of the Taz peninsula, going beyond the Arctic Circle, and satisfies about 10% of the demand for gas on the internal market of Russia.
For the first time in Russia, our premium products were engaged in hydraulic fracturing activities. We providedtubing with TMK FMT threaded connections produced jointly by the Sinarsky Pipe Plant and TMK Kaztrubprom to the Orenburg Region’s fields and successfully run the tubing column in two wells of over 4 thous. metres deep. Our premium connections assure combined strength and tightness to ensure safe and smooth high-pressure hydraulic fracturing.
We successfully implemented the technology of lubricant-free coating for threaded connections – GreenWell - which ensures pressure-tightness of the casing columns without using thread-sealing lubricants.This reduces the sinking preparation time by eliminating thread cleaning.The new polymer coating protects threaded connections against corrosion in storage and transit to fields. The Green Well technology complies with the strictest environmental standards and guarantees environmentally friendly well development and operation. The pilot batch of casing pipe with Green Well coating and TMK PF premium connections were run into two wells at Rosneft’s Vankorskoye field. Sinking completed, the experts of TMK and Rosneft confirmed the high added value of Green Well.
In July 2013, we started to supply casing and tubing pipe, crossover subs, filters and fittings, as well aslow-temperature premium connection pipe for production wells at Yamal LNG’s Yuzhno-Tambeyskoe field.
We pioneered the development and industrial production of vacuum insulated and plain-end tubing made of 13 Cr super-chromesteel with gas-tight premium threaded connections in Russia. This pipe is used in the production of gas and gas condensate with high carbon dioxide content in the Far North. The pilot batch of vacuum insulated tubing of 13 Cr super-chrome steel was shipped to Gazprom’s Bovanenkovskoye oil and gas condensate field on the Yamal peninsula. Previously, Russia had imported all such pipe.
Thanks to the high quality of our tubular products and comprehensive technical and service support, we are involved in complex projects calling for the use of advanced technologies and state-of-the-art equipment and services.
Large diameter pipe
In 2013, the Russian market for large diameter pipe (LDP) shrank by 1% year-on-year. However, our domestic LDP shipments grew by 17.2% and our share in Russia increased to 17.6% from 14.9% in 2012.
Our total LDP sales in 2013 went up by 8% to 442 thous. tonnes from 408 thous. tonnes in 2012.
In 2013, Gazprom remained TMK’s largest LDP buyer accounting for 43% of our LDP sales. We provided Gazprom with products for the onshore part of the South Stream gas trunk pipeline, with a big part of supplies focused on repair and maintenance needs.
In 2013, we completed the shipment of tubular products for the construction of deep water pipelines for Lukoil’s North Caspian project. Subject to the project requirements, all stages of the pipe production process, from steelmaking to finished goods shipment, were supervised by the Russian Maritime Register of Shipping.
In October 2013, we completed the LDP shipment for the Central Asia – China international natural gas pipeline. As stipulated by the contract,we shipped over 100 thous. tonnes of longitudinal welded pipe with 1,219 mm diameter and 17.5 mm pipe walls and external polyethylene coating, complying with API Spec standards. The Central Asia – China gas pipeline, stretching for 7 thous. km, links large natural gas fields of Central Asia with the Chinese gas transportation system. Success in such major projects underscores our professionalism in pipe production and reiterates our commitment to international quality standards.
In the reporting year, a large portion of TMK’s LDP shipments was used to meet Transneft’s repair and maintenance needs and to facilitate the construction of its Zapolyarye-Purpe and Kuyumba-Taishet oil pipelines.
In 2013, the seamless industrial pipe market declined by 3% due to weak demand from the engineering sector after Russia joined the WTO, while the welded industrial pipe market grew by 4% year-on-year driven by the extended use of welded shaped pipe in construction and structural steel manufacturing. Large cross-section shaped pipe are an alternative to shaped steel, including structural beams.
At 2013 year-end, we held a 31% share of the Russian market for seamless industrial steel pipe and had shipped 290.5 thous. tonnes of seamless industrial pipe (down 0.9% year-on-year), while our share of the welded industrial pipe market was 11%, with sales off by 5% to 264.5 thous. tonnes from 278 thous. tonnes year-on-year.