Letting off steam

There is massive demand for valves in the region as the downstream sector grows at a breakneck pace, and there is also a trend in utilising more sour products which are more corrosive and abrasive, meaning valve manufacturers must build their products to increasingly high standards.

Valve specialists are under rising pressure to provide products that cannot only perform under such circumstances, but will also have a long operating life and require as little servicing as possible.

According to JC Valves statistics, in 2007 the global valve market was worth US$45 billion, with an annual growth of 4-5%. Out of this market oil and gas makes up 18%, with refining operations taking a 14% share.

Petrochemicals Middle East spoke exclusively to Maurizio Cinque, managing director at Dresser Middle East, on the current trends in the industry.

“In the last two years we have seen an incredible upward trend in demand, and consequently, no thanks to our team, we have increased our market share at a tremendous rate. When I joined the turnover for this unit was around US$13 million, now after two years we are expecting to nearly double this,” says Cinque.

“Dresser has also increased the manufacturing capabilities, including in low-cost countries like India and Brazil. We are basically focusing in two main areas: one side is our manufacturing capabilities, and the other is our presence to the customers with more sales personnel.”

Dresser is not alone in feeling the dem-and in the market. Leading manufacturer Tyco has also had an unprecedented level of demand placed on the company in the region, not only in terms of quantity, but quality as well.

“In terms of demand it is no secret that projects in the petrochemical industry are booming, but what we are seeing is not just a demand for increasing number of valves, but a demand for a high standard and quality from our valves,” says Christophe Melinette, managing director, Tyco Valves and Controls Middle East.

“The level of expectance is increasing from our customers, and security is a priority which the customers are willing to pay a premium to get. There is nothing worse for an oil company than when a valve designed and built ten years ago develops a sudden problem – the repercussions are huge.”

Dresser valves which are in high demand from the downstream sector include Dresser Masoneilan and Dresser Consolidated, which Cinque says provide a wide range of specifications and requirements tailored for use in the industry.

“Last year Dresser Masoneilan was very proud to receive from Dow Equate Petrochemical, a Performance Certificate regarding some engineered control valves in anti-surge applications. These valves have been in service since September 1997 doing an excellent job for these demanding applications. They have required only minimum maintenance and overall have performed so well that Equate recommends to use these engineered products for any such future applications as well,” he says.

Under pressure

One of the main problems throughout the manufacturing sector is the rise in raw material prices. Valve manufacturers feel the full force of this dilemma thanks to the types of materials they must used, which are required to withstand extremely arduous environments – ultimately meaning corners cannot be cut.

“The rise in raw material price is a very unfortunate phenomenon, but it’s the same for everybody. Most of our customers are taking this into account in their business plan and their project plans before launching,” says Melinette.

“The main concern for us however is the delivery – if you want to keep the quality then the impact on the delivery becomes more important. Casting, delivery, security and quality are the key drivers today on this market.”

On top of this the petrochemical sector is having to adapt to handling high hydrogen sulphide (H2S) concentrations associated with sour oil and gas. An incredibly corrosive – as well as potentially lethal – substance, it results in more specialist materials having to be used.

“We have seen a tremendous increase in our customers’ requirements for new projects involved in the sour service. When products such as sour oil become more popular, then this is the time when you cannot afford to cut costs. If you look at Norway that is the sort of service we need here in the Middle East,” says Andy Hoxely, marketing manager, Tyco ME.

“What is required is an accurate analysis of process conditions and chemical compositions of fluid to select the proper valve design and the suitable materials. Dresser Masoneilan and Dresser Consolidated can provide a wide range of standard and engineered products suitable to sour applications, including lined valves, special alloys, self-draining trim designs and NACE tests and certifications,” says Cinque.

These issues are apparently not uncommon to other valve manufacturers. Michael Bovey, co-owner of Multi Valve and consultant to companies including Bell Valves, says sour issues are driving technological changes throughout the valve sector.

“Today one sees a lesser requirement for standard valve products as the industry is typically requiring valves to operate in more arduous applications. We are seeing ever increasing amounts of water produced in the wells and also volumes of hydrogen sulphide and carbon dioxide, which are necessitating, in certain instances, deployment of exotic materials which include super duplex materials, monels, hastelloys and even titanium in some cases,” says Bovey.

Once you add up the cost of building such valves to the rise in raw material prices, it is not surprising that opening new manufacturing facilities, in the much cheaper India and China, becomes an attractive proposition for companies.

“Dresser has already a factory in India and China and is ready to increase the relevant manufacturing capabilities, as per market needs. Of course these two low cost countries can represent a competitive advantage in the current global market,” says Cinque.

However, some are still very cautious when it comes to buying manufactured goods from India and China, and may shun the opportunity regardless of the much better prices that can be offered.

“The moment you know the castings are from China or India the end-user will need stringent inspection requirements and stage inspections before they even buy the valves, otherwise the expected valve life is going to be considerably reduced,” says Elvis Fuller of JC Valves Middle East. “If there is no control on the raw material the company buys from China then its end-user in trouble,” he adds somewhat solemnly.

Flow future

Fluctuating prices, due to raw material costs, are making the validity of valve pricing at early tender stages less reliable. However, sustained high prices have not dented demand for valve products, and as the industry expands the appetite remains strong throughout the industry.

Brian McFeely, of Anson Valves, says expediting goods to market is becoming a key differentiator.

“The main comment we get regularly from customers regards delivery, essentially can we get the equipment to market quick enough to satisfy the demand – valves usually form parts of large capital assets.”

“The demand for valves is huge at the moment. Most manufacturers have full factories, which has precipitated a significant increase in manufacturing lead times. Indeed, gone are the days when engineering contractors could expect valves in four to six months.”

“Now clients have to think about them as more of a long-lead item, than they ever previously had to do. It’s not uncommon for people to quoting anywhere from 50 – 65 weeks delivery nowadays,” says Bovey.

Fuller announces that JC Valves will be opening a manufacturing plant that will utilise vacuum technology, making their valves stronger, more durable and available here in the region.

“Using this technology we will be able to cast exotic type valves like duplex stainless steel, inconel and hastelloy on our premises. All the oil and gas companies have shown an interest in approving the Sharjah facility because it is something that is locally available for them to expedite output, and the price is competitive compared to other European makes,” says Fuller.

Vacuum technology, which essentially removes any gases and impurities during the metal melting phase, is something that can considerably enhance the life of the products.

“Usually a customer would have to replace a valve after about five years. However, with a vacuum treated valve it is going to last more than ten years. We have done some internal tests on the corrosion properties of vacuum treated steel against normal steel and found it was five times stronger and much longer lasting,” he adds.

Despite the problems faced within the industry over raw material prices and increased competition, including cutthroat pricing from Asian manufacturers, demand for quality valve products with a long lifespan, is expected to rise. Getting products to customers in a timely fashion will become a more dominant factor in selection for the region’s mega-projects.

Valve manufacturers will no doubt be kept on their toes with demand for higher pressure and more corrosive field development takes off in the Middle East.

The pivotal role in oil and gas production and the high demand across the industry ensures the health of the valve sector for the time being. But only the companies which satisfy tough requirements from project managers at a time when competition is stiff, will survive the race.