The Middle East OCTG and line pipe market outlook. James Ley Hatch Beddows 23 rd February 2011

Transcription

1 The Middle East OCTG and line pipe market outlook James Ley Hatch Beddows 23 rd February 2011

2 THE MIDDLE EAST OCTG AND LINE PIPE MARKETS Contents Hatch Beddows who we are The MENA OCTG markets The MENA LSAW markets 2

3 THE MIDDLE EAST OCTG AND LINE PIPE MARKETS Contents Hatch Beddows who we are The MENA OCTG markets The MENA LSAW markets 3

4 Our organisation Hatch supplies business, process and technology consulting, design and engineering and construction, operations and project management to the mining and metals, energy and infrastructure industries worldwide Established 1955 and employee owned 8000 highly skilled people serving clients worldwide US$16BN of projects now under management in 60 countries Our values Safety Quality Innovation Sustainable development Effective risk management We deliver unprecedented and sustained results for our clients 4

5 HATCH WHO WE ARE Global network 3200 USA Boston, Massachusetts Buffalo, New York New York, New York Millburn, New Jersey Monroeville, Pennsylvania Pittsburgh, Pennsylvania Pleasanton, California San Francisco, California Seattle, Washington Tampa, Florida Canada Calgary, Alberta Montreal, Quebec Sorel-Tracy, Quebec Sudbury, Ontario Toronto, Ontario Hamilton, Ontario Vancouver, British Columbia 1,200 South America Antofagasta, Chile Belo Horizonte Santiago, Chile Lima, Peru São Paulo, Brazil Vitoria, Brazil Europe/Russia/CIS London, England Moscow, Russia Donetsk, Ukraine St. Petersburg 150 Middle East KSA UAE Oman South Africa Johannesburg 800 (Red indicates regional hub) India Delhi 100 China Shanghai Beijing 150 New Caledonia Noumea

6 HATCH WHO WE ARE Hatch Consulting is the leading management consultancy dedicated to the mining and metals industries Hatch Consulting is the world s leading management consultancy specialising in the mining and metals industries and provides high level support services, ranging from corporate and business strategy development through strategic market studies to implementation of new technologies, management and operating practices Hatch Consulting is organised into specialised practices by industry and service, combining to provide precise solutions, expertly delivered to the exact needs of each individual client Hatch Beddows/Hatch Management Consulting is the strategy and market development practice, specialising in steel and raw materials, and providing strategy development and implementation services Investment and Business Planning (IBP) provides economic, environmental and technical evaluations of minerals properties and processing facilities, due diligence, pre-feasibility and feasibility studies and related investment planning and appraisal services 6

7 THE MIDDLE EAST OCTG AND LINE PIPE MARKETS Contents Hatch Beddows who we are The MENA OCTG markets The MENA LSAW markets 7

8 THE MENA OCTG MARKETS In 2009, MENA was estimated to be the fourth largest seamless OCTG market in the world behind China, North America and Russia Estimated 2009 seamless OCTG shipment by global market (kt) North Sea Russia North America ~ 450kt 1.2Mt 1.78Mt MENA China 1.03Mt 2.65Mt Less than 1Mt 1-2Mt Others 2-3Mt Source: Various and Hatch Beddows estimates ~ 2Mt. Markets include: The Stans, South America, India, West Africa, North West and Australia Total shipments ~ 9.2Mt 8

9 THE MENA OCTG MARKETS In MENA in 2009, drilling rig numbers dropped but activity has picked up into 2010 as oil prices have recovered on the international market Active drilling rig numbers in MENA from 2001 to 2010 Historic oil prices ($/barrel) Saudi Arabia UAE Oman Kuwait Qatar Bahrain Iran Iraq Egypt Libya Algeria Source: Baker Hughes, Schlumberger, BP and Hatch Beddows 9

10 THE MENA OCTG MARKETS Correspondingly seamless and ERW OCTG consumption in MENA dropped in 2009 Saudi Arabia appeared to be one of the hardest hit markets - demand is now recovering MENA OCTG consumption from (kt) MENA OCTG demand by leading markets from (kt) ERW estimated to account for ~ 8-9% of demand 1.5Mt -22% yoy CAGR = 22% E 2010 Seamless Welded Source: ISSB and Hatch Beddows estimates E 2010 Saudi Arabia Algeria Egypt Iran Others 10

11 THE MENA OCTG MARKETS Historically MENA has been an import led OCTG market Tenaris, Vallourec and the Japanese mills lead the proprietary OCTG supply and premium connections into the region China has a big presence in the API market 1600 Seamless OCTG and drill pipe imports into MENA by country from 1999-H (kt) Primarily just Vallourec mills exporting from these countries Primarily just Tenaris mills exporting from these countries China now has an extensive presence in the API market in the region H Austria Germany France Brazil Italy Argentina Mexico Japan USA China Russia Others Source: ISSB and Hatch Beddows 11

12 THE MENA OCTG MARKETS Chinese seamless OCTG mills have penetrated the North African OCTG market, and are now gaining increasing prominence in GCC markets such as Kuwait and Oman Chinese OCTG imports into MENA by country (kt) The Algerian market has been an open market for Chinese OCTG imports since 2004/5 Many Chinese mills are approved here by Sonatrach for OCTG supply, this includes Tier 2 Chinese mills as well as the leading Tier1 supplying mills Iran is also a growing market for Chinese seamless OCTG supply Kuwait, and to a lesser extent Oman in the GCC have also started approving and using Chinese seamless OCTG pipe in the standard API grades Other GCC markets are not understood to widely use Chinese OCTG currently although leading mills such as TPCO, Baosteel etc. are approved in most markets Algeria Kuwait Iran Oman Others Source: ISSB and Hatch Beddows 12

13 THE MENA OCTG MARKETS however, it will be difficult to penetrate the higher API and proprietary market. Vallourec, Tenaris etc. have an extensive local supply/distribution network despite not having hot finished seamless pipe mills in the region Overview of seamless pipe mills and key finishing facilities and service yards in MENA Tenaris service yards in North Africa 20,000 M2 in Libya ArcelorMittal Anaba 6-14 OD 100kt capacity Vallourec planned OCTG threading mill with long term partner Al Qahtani & Sons. Will open Q Tenaris service and finishing centre - Alexandria Vallourec service centre Esfarayen Seamless pipe mill 250kt (prod signf lower) OD ArcelorMittal/Bin Jarallah group seamless mill. Being constructed. 4 ½ - 16 OD 600kt JESCO seamless mill 5 ½ -16 OD 500kt Key Seamless pipe mill Finishing lines/threading shops Sales/Service centres Tenaris finishing facility opened Capacity 35,000tpy 5½ to 13 3/8. Will manufacture TenarisHydril premium connections Zamil - 170kt finishing line. Process pipes from 4 ½ to 13 3/8 OD VAM Drilling Middle East local supply of drilling products and services certified for sour service Tenaris commercial offices Source: Various and Hatch Beddows 13

14 THE MENA OCTG MARKETS Drilling activity is strengthening across the region Oman, Kuwait and Iraq are all hot spots currently for increased OCTG demand Iraq e.g. BP/CNPC with the Rumaila oil field. Orig facilities date back to the 1950 s in the South and 1970 s in the North. 2010/11/12 significant upgrade of the Rumaila field required to maximise oil production Some examples of major and planned drilling programs in the Middle East KOC with IOC s developing Project Kuwait to increase oil production from 4Mbpd from over 2.5Mbp currently. Planned development/drilling of a lot of heavy oil fields in the north of the country e.g. Raudhatain field. Several large tenders for OCTG have recently been in the market Saudi Aramco expected to tender for OCTG soon. The country is developing its drilling for gas with possible plans for the Red Sea etc. OXY have active drilling programs in Oman (Mukhaizna and Safah), Bahrain and are now taking on the development of the Shah gas field with ADNOC in the UAE Source: various and Hatch Beddows 14

15 THE MENA OCTG MARKETS Demand for OCTG in Iraq has begun to rebound back to pre Gulf War levels, with OCTG demand in 2011 expected to be around 100kt Seamless OCTG casing and tubing direct imports into Iraq from 1999 H (tonnes) 70,000 60,000 voestalpine were heavily present in the import market into Iraq prior to the war 50,000 40,000 30,000 20,000 As the Iraqi market begins to recover it appears to be Tenaris that is taking the majority share of the direct import business 10, H12010 Argentina Mexico Italy Austria Others Source: ISSB and Hatch Beddows 15

16 THE MENA OCTG MARKETS Growth across MENA is forecast to occur in the heat-treated API grades and to some extent in the proprietary market. A key factor will also be the use of premium connections across the region Forecast demand for OCTG in MENA through to 2019 by grade (kt) Source: Hatch Beddows 16

17 THE MENA OCTG AND LINE PIPE MARKETS Contents Hatch Beddows who we are The MENA OCTG markets The MENA LSAW markets 17

18 THE MENA LSAW MARKETS In 2009 the EU saw a sharp rise in LSAW consumption due largely to the NordStream project. China, Australia and Kazakhstan also performed well with LSAW demand in MENA slowing Estimated global LSAW consumption by region in 2009 Canadian LSAW consumption = 190kt Down 10kt y-o-y EU LSAW consumption = 1.31Mt Up 770kt y-o-y Russian LSAW consumption = 1.26Mt Down 160kt y-o-y Kazakhstan LSAW consumption = 570kt Up 340kt y-o-y USA LSAW consumption = 820kt Down 210kt y-o-y MENA LSAW consumption = 2.13Mt Down 940kt y-o-y Chinese LSAW consumption = 2Mt Up 370kt y-o-y South American LSAW consumption = 290kt Down 204kt y-o-y Indian LSAW consumption = 180kt Unchanged y-o-y Global LSAW consumption in 2009 = 10.2Mt Australian LSAW consumption = 290kt Up 240kt y-o-y Source: Company data, ISSB and Hatch 18

19 THE MENA LSAW MARKETS LSAW consumption peaked in MENA at over 3Mt in 2006 demand remained around 2.5Mt before dropping to just under 2Mt in 2010, local production has gained an increasing share of the supply market LSAW consumption in MENA from (kt) Consumption of LSAW in the Middle East in local production vs imports CAGR = 24.5% Imports estimated to account for around 57% of demand in Imports 48% Local production 52% E 2010 Saudi Arabia UAE Iran Others Source: Hatch Beddows 19

20 THE MENA LSAW MARKETS There will be four LSAW mills in the GCC by 2011, Iran has three and Egypt and the UAE one, Iraq is likely to follow with another mill. Turkey also entered the LSAW market in Q4 2009, and close neighbour India has excess capacity Location of LSAW mills in MENA and the surrounding region Ahwaz Pipe Mill (APM) Umran Boru Safa Rollling Jindal SAW IPIC Mahshahr Steel Pipe Plant (Sadid) Saudi Steel Pipe (SSP)/EEW Essar National Pipe Company (NPC) Jindal SAW Man Industries Arabian Pipe Company (APC) Welspun Ratanami Metals Al-Jazira Pipe Mill Existing mill New mill entered market in 2009 Source: Hatch Beddows New mill arriving in 2010/11 New mill arriving after

21 THE MENA LSAW MARKETS Current project requirements suggest some 25Mt of line pipe might be needed in the region through to 2017 Hatch revised forecast for line pipe demand from current identified potential projects based on the viability of Mega projects progressing to 2017 (kt) 6000 Market demand is expected to recover in This method for estimating demand is only useful in the short-term e.g. through to Beyond this, there is limited information currently available about projects likely to be 4000 built after this time Iran Iraq Turkey Saudi Arabia Qatar UAE Kuwait Egypt Libya Syria Jordan Israel Yemen Total tonnage of line pipe to 2017 = 25Mt Source: Simdex and Hatch estimates 21

22 THE MENA LSAW MARKETS For this forecast, Mega projects (over 500kt) account for around a third of the demand for line pipes in the region Overview of some of the major pipe line projects planned in the Middle East Project From To Expected startdate Year of completion Estimated diameter (inch) Estimated length (km) Estimated tonnage (kt) The Trans-Gulf Strategic pipeline 9 th Cross Country Gas Pipeline Iraq Oman ,414 1,100 Iran Turkey ,740 1,300 Pars Pipeline Iran section Iran Germany ,740 1,300 IPI Iran-Pakistan Alternative subsea Iran Pakistan , IPP Onshore segment Iran Pakistan , Neka to Jask oil pipe line Iran Iran , GUSA project Qatar Pakistan , Qatar to Turkey pipeline Qatar Turkey ,500 1,400 Water supply for Dakhiliyah Region Oman Oman , Total tonnage of proposed Mega pipe lines 8,200 Total tonnage of all forecast line pipe projects in the region 25,000 Source: Simdex, various and Hatch Beddows 22

23 THE MENA LSAW MARKETS To develop longer-term LSAW forecasts oil supply/demand and prices need to be looked at. OPEC spare oil capacity is not forecast to significantly decline until 2020 with demand increasing significantly from 2015 Million b/d Forecast oil supply, demand and prices $2008/bbl Total Non-OPEC supply Total OPEC Capacity OPEC spare capacity Total world demand (RHS) WTI (Real) 0 Source: Wood Mackenzie and Hatch 23

24 THE MENA LSAW MARKETS Long term forecasts for LSAW demand in MENA and Turkey suggest a market of at least 2Mt of pipe per year will be needed in the region Comparison of three scenario forecasts for LSAW pipe demand in MENA through until 2025 (kt) Source: Hatch Beddows 24

25 THE MENA LSAW MARKETS Iraq has the potential to become a significant net importer of LSAW line pipes in the medium-term (through to 2016/17) with the long-term base case forecast still suggesting that the market will need 200kt of imports Forecast Iraq supply and demand of LSAW line pipe to 2025 (kt) Note: Iraq forecast supply assumes that Iraq LSAW mills are operating at a 55% utilisation rate Source: Hatch 25

26 THE MIDDLE EAST OCTG AND LINE PIPE MARKETS Thank you for your attention. For further information, please contact: + ( * James Ley Senior Consultant Hatch Management Consulting 9 th Floor, Portland House, Bressenden Place, London, SW1E 5BH, UK +44 (0) jley@hatch-europe.com + ( * Roman Filimonov Consultant Hatch Management Consulting 9th Floor, Portland House, Bressenden Place, London, SW1E 5BH, UK + 44 (0) rfilimonov@hatch-europe.com + ( * Lynn Lupori-Gray Senior Consultant Hatch Management Consulting 1600 West Carson Street, Gateway View Plaza, Pittsburgh, PA 15219, USA llupori-gray@hatch.ca + ( * Terance Ko Director Hatch Management Consulting Room , Tower W1, Oriental Plaza, Beijing, , China tko@hatch.com.cn 26