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Russia's TMK expects U.S. gas export boom
September 24, 2012 / 3:30 PM / 5 years ago

Russia's TMK expects U.S. gas export boom

MOSCOW (Reuters) - Russia’s TMK (TRMK.MM), a major global supplier of steel pipes for the oil and gas sector, expects Washington to give the go-ahead for U.S. exports of natural gas, creating a wave of demand for pipes, its chairman said on Monday.

Dmitry Pumpyanksy, Chairman of TMK, speaks during an interview with Reuters journalists in Moscow September 24, 2012. REUTERS/Maxim Shemetov

Dmitry Pumpyansky, TMK’s chairman and majority stakeholder, said exports of natural gas from the United States, following its boom in shale gas exploration, would have important implications for the global energy sector.

“I am absolutely convinced that the United States will become a net exporter,” he told the Reuters Russia Investment Summit in an interview. “This will increase demand for various products necessary to extract (shale) gas including pipes.”

Booming shale gas output in the United States has caused prices there to plummet and the U.S. government is considering whether to grant permission to export excess supply as liquefied natural gas. This would ease the domestic glut and help satisfy demand in growing markets in Asia.

“This will be a revolution in the global energy sector,” Pumpyansky said. “If the U.S. government gives permission (to export gas), it will flow to Asia and Europe, which have significantly higher gas price than the U.S.”

He said TMK expects its sales to be at least flat year-on-year in 2012. “This would be a good result for us at times of macroeconomic instability and slump in certain markets,” he said.

Despite growing competition from emerging-market rivals, he said TMK was fighting back with a drive to higher quality. And he said TMK had a competitive advantage because of its logistics.

”In Russia we don’t expect our competitors from overseas matching us in terms of timely deliveries. We ship pipes to our long-term customers on demand -- a client picks up the handset and in two weeks the pipes are in the well,“ he said. ”Meanwhile, it will take months to deliver pipes from China, Brazil or Argentina.

LARGE-DIAMETER PIPES

Demand for pipes has been boosted by a shift to drilling shale for more lucrative crude oil. “This boom in oil drilling ... will ensure growth in shipments (to U.S. markets) by 10 to 15 percent to 1.1 million tonnes this year,” Pumpyansky said.

TMK, like other makers of steel pipes, has lost sales this year in Russia because its main customers, Gazprom (GAZP.MM) and Transneft (TRNF_p.MM), have reduced purchases after completing large construction projects.

Pumpyansky said large-diameter pipes (LDP) purchases by Russian customers would fall by more than a third this year to between 1.7 and 1.8 million metric tonnes from 2.8 million last year before improving.

“We see a certain revival at the end of the year,” he said. “Supplies for the inland part of the South Stream pipeline and the second phase of the Bovanenkovo-Ukhta pipeline will start in the fourth quarter.”

Gazprom is due to launch the giant Arctic Bovanenkovo field in coming months. It has already built the first phase of the Bovanenkovo-Ukhta pipeline, which links the field to the pipeline that carries Russian gas to Poland and beyond.

He said TMK was supplying up to 85 percent of Gazprom’s demand for OCTG pipes and was also delivering pipes for Lukoil’s (LKOH.MM) Caspian Sea oil projects and Russia’s locomotive oilfield Vankor, run by Rosneft (ROSN.MM).

Competition from Chinese producers, which have turned to foreign markets while their domestic economy slows, are however denting the company’s sales.

Chinese companies have greater access to markets in Russia following Russia’s accession to the World Trade Organization in August and one major oil producer, BP’s (BP.L) Russian joint venture TNK-BP TNBP.MM, has said it could turn to Chinese suppliers. Its contract with TMK is up this year.

“We feel the competition from Chinese products, but mostly from commodity ones, not premium,” Pumpyansky said, adding the company would focus on improving quality as a way to beat lower-cost competitors. He said 50 percent of TMK’s products already exceed requirements set by the American Petroleum Institute.

“Today, having an American Petroleum Institute certificate is not even a tram ticket,” he said. “It (only) gives you the right to come to the tram stop.”

Editing by Melissa Akin and David Holmes

Our Standards:The Thomson Reuters Trust Principles.
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