In the pipeline

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The pipes sector is constantly being kept on its toes by delayed projects, raw material price drops and manufacturing competition.

Think of the hundreds of thousands, possibly millions of miles of pipes and pipelines around the world, compliantly delivering enormous magnitudes of black gold and natural gas. This endless network is the lifeline to much of the world’s energy needs – if the reservoir is the heart, then the pipelines are the arteries.

It would seem simple enough: just weld a lot of steel pipes together from the production site to the refinery or petrochemical complex. However there are many considerations to consider, from pumps, valves and flanges, to cathodic protection and pigging, to specialist materials and coatings. Just like any other forms of transportation, there are many logistical issues to consider.

One such factor has been sparked by the sudden drop in raw material prices that has happened in conjunction with the huge oil price falls, in particular the price of steel. Although high grade API (American Petroleum Institute) has been less affected, the fall has led to problems in the market place.

Speaking exclusively to Oil and Gas Middle East, managing director of Dubai-based Armana Pipeline, Nabil Helou, highlighted the recent trend of raw material prices falling in the market place, leading to cheaper piping.

“We are a contractor, so we procure, purchase, insulate, coat, line and install the pipelines. Definitely prices have dropped – you are finding that pipe prices have fallen by 20-30% over the last six months,” says Helou.

“Coupled with that is another problem; because demand for piping has reduced there are a lot of steel mills closing down. As this happens you end up with minimal supply and also minimal availability of demand. Now demand has dropped, supply has dropped.”

Recently, Japanese steel manufacturers, Sumitomi Metal Industries, announced that it expected demand for steel pipe used in the energy sector to remain steady in 2009 while demand from other sectors does begin to fall. Fumio Hombe, vice president of Sumitomo Metal, added that demand for seamless steel pipe used in the oil and gas and petrochemical sectors has changed very little amid falling oil prices.

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