Piping hot

This lack of supply is proving a major constraint in the development of hydrocarbon processing and transportation facilities. Here in the Middle East, a push for rapid development and plant refurbishment is exacerbating the problem.

Surprisingly, the worldwide pinch on supply is having some surprisingly positive effects on the industry worldwide, and from a producing perspective, this region in particular says Yaseen Jaffer, CEO of the Proclad Group.

“People used to complain when lead times were five months, then it jumped to eight months, and now we’re in a situation where some of the pipes for this sector are realistically 18 months to delivery, which has had an obvious knock-on impact on project completion,” says Jaffer.

However, because of these the long lead times all of the various organisations involved in refurbishing or building installations from scratch, are working together much sooner in the development phase.

“The oil and gas industries are incorporating more comprehensive planning at an early stage and we’re seeing contractors, developers and end clients coming together and working more closely at a more advanced level than in the past,” he adds.

To cope with the piping shortage, the key elements involved in plant and pipeline are moving towards a more coordinated and direct approach. “The issue of forward planning and decision-making is becoming more streamlined, more focused and much quicker as a result of this.

“This is in everyone’s interest as a three month delay on certain items could quite easily translate to a one year delay on final delivery of the overall project.

Ultimately the specialised piping needed for oil and gas work is a vital part of the development, so by planning much further ahead projects can remain on-track.”

The global shortage of high tensile steel piping is one that Jaffer sees the industry stuck with for a while yet.

The situation has come about because of unprecedented demand, and we don’t see that dropping off in the short term, however, building the plants necessary to fabricate these pipes also has a long lead, so supply will increase, just not to demand level for five years.

Construction of the smelters and factories is underway but these facilities are not yet ready to meet the voracious appetite of an industry looking to capitalise on the current price environment.

“For the industry to take full advantage of the oil price being where it is, it needs its infrastructure up and ready as soon as possible.

It’s not possible to forecast a three year oil price, nobody knows, so the only way projects can push forward in the timescale’s we’re talking about is through much more extensive co-operation,” says Jaffer.

While India and China are rushing to gear up production to meet the global demand, the fabrication of the pipes needed for the oil and gas sectors is still dominated by American, European and Japanese firms, all looking at innovative ways to up production capacity.

However, the spike in regional demand has not gone unnoticed, and in the past two years Middle Eastern companies have invested heavily in pipe manufacturing facilities. In Saudi Arabia there are two large pipe manufacturing plants coming up, and in Oman there is another.

In the UAE a Proclad fabrication plant in Jebel Ali’s TechnoPark, is set to open its doors for business this year.

“The growth in the Middle East pipe manufacturing sector has been driven by huge demand and because of the shortage and subsequent long lead times.

In the past having pipe manufacturing here may have been quite surprising, but now companies are readily thinking about establishing their own local facilities here to reach a burgeoning industry directly,” explains Jaffer.

Steel has shot up in price in recent years, and this too is driving the region to develop its own raw material processing industry, something already underway in Saudi Arabia.

Because of the fluctuating prices and global demand I think we’ll certainly continue to see local investment in the fabrication sector to make the production cycle complete in the Middle East,” he says.

Demand for these products is booming not just in the Middle East, but also Brazil, China, India, and the North Sea. Oilfields that were neglected for a long time are being thrown back into full production to maximise revenues in the current price environment, which is contributing to the pipe demand spike.

“In a very short time I think we’ll see the Middle Eastern companies bursting into this market because investment is flooding into this sector now. Those that are successful here will of course benefit from the huge number of oil and gas projects coming up in the area,” adds Jaffer.

The Proclad mill is being established in TechnoPark to tap into this regional demand at source. “We’ve gone for a very niche sector, with a small number of competitors,” he says.

The niche in question is cladding pipes internally, to protect against the corrosive properties of sour products. Sour gas is natural gas containing significant amounts of hydrogen sulphide.

Before a raw natural gas containing hydrogen sulphide can be used, the raw gas must be treated to remove those impurities to acceptable levels, known as ‘sweetening’.

Hydrogen sulphide is a toxic gas and places restrictions on the materials than can be used for piping and other equipment handling sour gas, as many metals are sensitive to sulphide stress cracking.

The cladding we provide is needed to protect steel pipes from sour products passing through, or other chemical agents which may be present, such as chlorine or salt.

These products, unchecked, degrade the pipeline eating it from the inside out,” explains Jaffer. Internal cladding enhances the life of the pipeline considerably, for up to 30 years.

The requirement for internal cladding is growing right across the region. As drilling in the Middle East goes deeper, typically more of the product is sour. In Abu Dhabi, Qatar, Oman and Saudi Arabia this is happening in all fields, offshore and onshore.

From the UAE office Proclad manages work from the Middle East, North Africa, the former Soviet Union countries and elements of SE Asia. For the mechanically clad piping products the UAE facility will manage the company’s operations worldwide.

This means the UAE office will handle accounts and contracts across a vast emerging market area where oil and gas infrastructure is maturing fast. “The market we’re serving is certainly an exciting one,” beams Jaffer.

Mechanically weld clad piping is the groups biggest product to the market right now, and sales for these pipes have grown over 100% in under three years. The protective weld cladding of pipeline components is licensed under American Petroleum Institute specification for the processing of clad steel pipe.

The automated protective weld surfacing systems apply high integrity corrosion resistant alloys and Duplex stainless steels to a variety of substrates such as carbon manganese, low alloy, and ferric stainless steels, in sizes from 50mm and above, and wall thickness of 6mm and above.

This process has been proved to significantly enhance the service life of new components and can also be used to refurbish and upgrade components, which have already been in service.

The type of oil and gas extracted in the Middle East is dictating the internal cladding needs, but the environment commands a different set of cladding needs for the exterior of the region’s pipes. The most common problem in this region is the acidity of the soil pipes are placed in.

To overcome this, the pipes are coated externally to protect the steel from either the salinity or acidity depending on the soil or sand in question.

“Sometimes the salinity of the soil can cause erosion that eats through the outside of the pipe itself. Also, where you have a mix of wind and sand, that turns the atmosphere into a sandblaster which, over time will degrade the pipe exterior.

The group expects full production from its TechnoPark facility to begin in the second half of this year, and will be looking to the oil and gas industry to recoup its huge investment.

The first phase of the fabrication plant, Jaffer estimates, represents a US$400 million outlay, and the second phase, due to start construction early next year will come in at US$350 million.

Through Proclad’s work with major regional NOC’s, Jaffer remains convinced the market for clad piping will remain string for the next five years. “The projects underway now will not be stopped, plus older fields are being refurbished too, so we’re not reliant on new developments.

There is excess capital in NOC budgets right now, so we won’t see the market contract for some time yet,” he concludes.