Andrei Karunos

F

or a long time plans to construct a long-distance pipes complex in Russia remained unfulfilled. Alliances set up with this purpose in mind disintegrated, new projects failed to get financial support. Difficulties arose because the main consumer - Gazprom, a state-run monopoly – did not agree to guarantee orders for this product. Wanting it investments could not be attracted.
However, UMC did not obtain an order guarantee either. Company’s President Anatoly Sedykh admits that for 2005 only a contract for supply of 100,000 tons of pipes to Gazprom was concluded but he is convinced that the new product line will be called for in full. Sedykh reasons it in the following way. First, consumption of hydrocarbon material grows worldwide at a high pace, and it means that new deposits will be utilized and pipeline systems will be developed. Second, the new pipe line at VMZ features today’s best performance and its products will be accordingly competitive in world markets. The design capacity of the line is 450,000-500,000 tons of 1420mm dia. long-distance pipes and the total capacity of UMC for production of long-distance pipes once the new line is commissioned will be over 1.5 million tons per year.
At the new facility VMZ can make a wide range of electric-weld pipes of 530 up to 1420 mm in diameter with up to 48 mm wall thickness with external and internal corrosion-resistant coating. These pipes withstanding up to 250 atm are fully in line with Gazprom requirements. Transneft dealing with operation of oil pipelines can also become their consumer. Larger wall thickness and special steel quality permit their application during implementation of offshore oil projects.
The UMC project to set up production of 1420mm dia. pipes was implemented for 24 months only and financed mainly by the company itself. The investments amounted to US$172m, with only US$30m as borrowed funds.
SMS-Meer, Germany, was the equipment maker. The heart of the line, an unique U- and O-ing press weighing about 500 t, was delivered from Germany to the Nizhegorodsky Region (where VMZ is located) by watercourse because no flat wagon can carry such a cargo. SMS-Meer also supplied an edge-planing machine, an edge-forming press, a hydraulic press, a welding mill and an expander. Among the suppliers of welding and test equipment there were German Uhrhan & Schwill and Zwik, Dutch Bauhaus and NKMZ (Ukraine) and EZTM (Russia).
During the ceremony of the start-up of the new line where the top managers of companies which took part in the construction were present, UMC President Anatoly Sedykh claimed:
"For UMC the new line is not only a successful completion of a regular big investment project. We are Russia’s first to begin the output of product without analogs in this country and in demand in home and foreign markets. Our consumers – Gazprom, Russian oil companies – may be now sure that there is the Russian maker able to ensure their full range of high-quality, reliable and competitive pipes of world standard. Today we, UMC and the Vyksa Steel Works, are proud of the well-done job. And this pride must be entered into by our partners".
The project was highly appreciated by the other ceremony participants. For example, Gazprom Board of Directors Member Valery Golubev reminded of the preparation for very promising projects among which there are the development of deposits of the Yamal Peninsula, the Barents Sea shelves (where pipelines have to be laid at a depth of up to 200 m and an offshore distance of 500 km) and the construction of the North European gas pipeline. According to Valery Golubev, "Russian pipes of UMC make can be applied at these sites". General Director of TsUP Stroyneft Mikhail Polonsky named the start-up of the new line especially of interest due to the forthcoming plans of construction of the East Siberian long-distance oil pipeline. He believes that new VMZ pipes will be required for it already this year.
Sedykh once again emphasized that the new line could produce different types of pipes. "The heavy press we ordered can make pipes of lower diameter with very thick wall which means that we shall be able to take part in all offshore world projects. This line permits a new and very expensive market niche to be opened up for us. It can be, for instance, a 730x36mm pipe. This pipe can be also made only by another producer in the world".
UMC success was also set store by colleagues. For example, Head of ChTPZ-group Andrey Komarov, a former partner of Anatoly Sedykh, is of the opinion that the new product can get such a good market in Russia that "no possibility of export can be left". UMC President is convinced that the events will turn like this. "We have no doubt that Gazprom will buy the entire volume (450,000 t of 1420mm pipes per year)", says Sedykh. "Now demand is slightly higher than our capability. In Russia there are no other pipes of similar quality whereas German ones are much more expensive".
Meanwhile UMC intends to make use of export possibilities. According to Anatoly Sedykh, the products to be made at the new line attract an interest of foreign consumers. "We have already conducted some negotiations", said Sedykh. "We have no doubt with respect to sales for several nearby years". As UMC President believes, it will take four years for the project to be paid off.
From the viewpoint of analysts, a certain problem in this project is that UMC does not have rolling operations of its own to make special plate. Anatoly Sedykh mentions two variants to purchase plate for 1420mm pipes: from foreign companies and from Russian Severstal Group which has a 5000mm mill. As Sedykh claims, these variants are close in price but Severstal is inferior in quality. Negotiations with Japanese and German companies as well as POSCO (South Korea) are going on. "From the viewpoint of logistics, Japanese supplies are not the most efficient", Sedykh admits. "But with due regard to high steel prices when a share of transport charges in goods is reduced the transportation costs factor becomes not so essential. Earlier we felt there was a gap in steel prices in Russia and abroad but not now".
Moreover, UMC is willing to use a lower-width plate "if buyers are reedy to purchase twin-seam pipes". The president insists that the seam quality at the new line is very high.
In future UMC plans to set up an own casting-and-rolling complex to provide for pipemaking at VMZ and the Almetyevsk Pipe-Rolling Mill (also incorporated into UMC). The products of the future complex – hot-rolled coils – will be designed for 21-530mm dia. tubes. The capacity will be 1.2 million t of coils per year. In March, 2005 UMC signed a contract with Danieli for the supply of the equipment for the complex.
In a year another 1420mm pipe line is to be commissioned in Russia. Severstal will implement this project. The annual capacity of this pipe plant, like that of VMZ, is estimated at 450,000 t of single-seam welded pipes of 610-1420 mm in diameter, up to 18.3 m in length with a three-layer polymer coating. The main equipment for this line is also supplied by SMS-Meer.
Competition is mounting up. However Anatoly Sedykh is sure that there will be enough place in the market for both his company and Severstal". "Requirement of large-diameter pipes goes up. Construction of one pipeline takes about 2.8 million t of pipes. Meanwhile our pipes can be applied in unique projects, including development of offshore deposits, when Russia will start to deal with them".

Reference:
United Metallurgical Company accounts for 20% of all domestic supplies of tubes & pipes, including about 30% in the large-diameter pipes sector. Besides, the company occupies 60% of the railway wheels and automotive springs market. In 2004 UMC made about 1,000,000 t of tubes & pipe products of various standard types as well as over 430,000 t of rolled products and 750,000 t of railway wheels. The main consumers include Gazprom, LUKoil, Transneft, Surgutneft, Rosneft, YuKOS, TNK-VR, ExxonMobil, Royal Dutch/Shell, General Electric, Samsung.


Photoes: UMC President is convinced that the 1420mm pipes project will be a success
Superscription on the first 1420mm pipe: "Made in Vyksa, made for Russia".
Single-seam longitudinal electric-weld pipe line.