Demand for large-diameter pipes in Russia fell by 25% last year, according to the annual report of the Chelyabinsk Tube Rolling Plant (CHTPZ), Andrei Komarov. Compared to 2015, demand collapsed more than doubled, according to the Pipe Industry Development Fund (FRTP). Pipes of large diameter (from 530 to 1420 mm) are used in the construction of main pipelines for pumping gas, oil and petroleum products. In 2016, according to ChTPZ, in Russia they were sold 2.1 million tons, and in 2017 - only 1.6 million tons.
Decrease in demand, although not as significant - only 2%, will continue in 2018, predicts the FRTP. The Center for Economic Forecasting of Gazprombank gives a similar forecast - a decrease of 4%. Already, the pipe mills in Russia are operating at a third of capacity, said Maxim Khudalov, director of the corporate ratings group of ACRA.
The demand for pipes is rapidly declining due to the completion of major projects of Gazprom and the construction of the Crimean bridge, the report of ChTPZ says. It took 240,000 tons of pipes for the bridge. They were used as piles.
Gazprom next year expects to complete the construction of three pipelines at once: the Power of Siberia, the Nord Stream-2 and the Turkish Stream. Pipes for them have already been purchased. Therefore, in 2018-2019. the company's demand for the products will be about 1 million tons per year, said Mikhail Burmistrov, general director of Infoline Analytics.
It is Gazprom that traditionally is the largest consumer of pipes. In 2012-2017 years. its share ranged from 44 to 65%, follows from the March presentation of TMK Dmitry Pumpyansky. The second in this indicator is Transneft. It accounted for 12% of pipe deliveries in 2017, follows from the presentation.
Pipe manufacturers have to look for other buyers. For example, last fall OMK's main shareholder, Anatoly Sedykh, said that in the next five years the pipe capacity of his company will be at least 70-80%. With the end of major investment projects of Gazprom, OMK will switch to other markets. According to Sedykh, the company plans to participate in a tender for the delivery of pipes for the construction of the Turkmenistan-Afghanistan-Pakistan-India gas pipeline, as well as the Rosneft project in Iraqi Kurdistan, if implemented. Yesterday the representative of OMK declined to comment.
A representative of Severstal noted that the Izhora Pipe Plant, owned by the company, was 100% loaded. The plant became the winner of contests for the supply of pipes for the development of gas transmission capacities in the North-West region, he explains. Total for the contracts in 2018-2019. approximately 165,000 tons of pipes will be delivered.
The decrease in demand for large diameter pipes is compensated by the growth in demand for other products. The consumption of OCTG pipes (drilling, casing and tubing used in drilling, equipment and operation of oil and gas wells) and pipes for horizontal drilling is growing. According to ChTPZ, in 2017 consumption of OCTG in Russia increased by 14.5% to 2.29 million tonnes. The main producer of such pipes in Russia is TMK. In addition, it has large factories in the USA.
The share of TMK in this market in the world is 15%, and the growth in production was almost a quarter. In the US, last year, the US division of TMK entered the top 3 OCTG manufacturers, a company spokesman said.
This was largely due to the boom of shale mining in the US. Oilmen need pipes to drill new wells. In the US, from September 2016 to January 2018, oil production increased by 16.5%, according to the US Energy Information Administration. As analysts of Credit Suiss wrote, long-term prospects for the sector are positive, despite the fear of the beginning of the global trade war and the removal of part of the sectoral sanctions from South Korea. "The prices for OCTG pipes are at the highest level since 2015," the Credit Suisse report says. As a result, the US division of TMK in 2017 brought the company 22.6% of revenue - $ 994 million out of the total $ 4.4 billion. Production in the American factories of the company in 2017 increased by 14% to 1.483 million tonnes.
Restoration of world oil prices began in 2016. For two years, prices for Brent crude rose by almost 83%, according to Thomson Reuters. Prices grew on the back of rising demand for oil and supply restrictions on the part of OPEC and 11 countries that joined the cartel, says Raiffeisen analyst Andrei Polishchuk. In his view, drilling of both traditional oil fields and heavy oil fields, including shale oil, is increasing.
But in Russia there is no drilling boom. From January 2015 to January 2018, this figure rose less than 3%, according to Thomson Reuters. "Oil prices remain at high levels, capital expenditures of oil companies do not fall, but due to the deal with OPEC, oil production in Russia at mature fields does not grow significantly. This shifts the demand towards premium pipes associated with horizontal drilling and the development of hard-to-recover reserves, "says Andrei Lobazov, an analyst at Aton.