Pressure point

But with many of the technologies and services provided having existed for many years, how does the industry continue to improve its services and cater for a changing energy industry?

Not only is demand and investment in oil and gas production continuing to grow, pushing demand for valves, there are also issues of increasingly arduous practices involved in harsher drilling environments.

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

Valves essentially are used to stop, regulate and divert the flow of liquids, gas, slurries or dry material. They can be operated remotely and can control various parameters like flow, temperature, pressure and volume.

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.

Oil and Gas Middle East spoke to Christophe Melinette, managing director of Tyco Valves and Controls Middle East, to see what the driving forces in the industry were at present.

In terms of demand it is no secret that projects in the oil and gas industry are booming, but what we are seeing is not just a demand for increasing numbers of valves but a demand for a high standard and quality from our valves,” says Melinette

“The level of expectance is increasing form 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.”

Tyco describes itself as: “A global network, bringing the manufacture, marketing and sales of a range of industrial flow control products to clients around the world.” The Tyco network has grown rapidly since acquisitions that began in the early 1990s.

In this time the company has seen the price of raw material rise rapidly, which obviously has had a detrimental affect on item profitability.

The rise in raw materials 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 price of oil is very good driver for oil industry, but the price of raw material is not a good driver for us.

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.

Then there is the issue of sour products, that is oil and gas with high corrosive properties, which are becoming more attractive to producers despite the associated problems.

Andy Hoxely, marketing manager of Tyco ME, says the appetite in the region is growing.

We have seen a tremendous increase in our customers’ requirements for new projects involved in the sour service. When products such as sour gas 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 in the ME.”

The Middle East is the fastest growing market for Tyco, so the valves must be able to handle the strenuous operational requirements. Developing the sour market brings new challenges, firstly because of the corrosive nature of the contaminants, but also concerning relevant expertise in the region, observes Melinette.

I think expertise it is the most important challenge in for the ME region – everything is growing, everything is booming. With raw materials you get what you pay for, but expertise is a little tougher as it means being able to attract the right talents, in a verycompetitive market.”

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.

“Now what we are seeing an increasing amount of is the need for the things like inconel – where we would typically perhaps supply a carbon steel bodied valve but it would be fully clad with inconel 625 or 825 so that it meets the corrosive environment that the medium is creating,” he says.

If that wasn’t challenging enough, there is also the desire for valves that can cope with much higher pressures.

“Valves are required that can work in very deep water, sort of sub-sea facilities, where we are being requested to build very high pressure and high specification products that will be operating in possibly in excess of 2500 metres of water,” says Bovey.

In terms of having the correct valves in operation, Bovey believes this is not always the case: “There are examples in this part of the world that I can think of whereby the end-user has got old products which were perhaps supplied to the correct specification when ordered, but because of the changes to the wells, the actual product coming from the fields is not as pleasant as when the product was specified, and to actually get the end-user to upgrade the product can often be quite hard.

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

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

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

So with much tougher requirements on the composition and reliability of the valve the solution may lie in manufacturing the product closer to markets. JC Valves plans to open a fully liquidated valve factory in Sharjah which will make use of vacuum technology to make high-grade valves available 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 Elvis Fuller of JC Valves Middle East.

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 longerlasting,” says Fuller.

With the hike in raw material prices, there is the possibility of looking to the Far-East and India, where manufacturing costs and economies of scale bring greater financial incentive to producers. According to Fuller, yielding to this temptation would be a risky strategy.

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.

If there is no control on the raw material the company buys from China then its end-user in trouble,” he warns.

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.

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 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.