Home | Business News | Browse by Publication | M | Metal Center News

Profits in the pipeline: suppliers are working hard to keep up with demand for energy tubulars, especially line pipe.

Article Excerpt
[ILLUSTRATION OMITTED]

HIGH CRUDE OIL AND NATURAL GAS PRICES continue to propel demand for pipe and tube as energy providers work to pull the precious fuels from the ground and deliver them to refineries. While demand is high for all energy-related tubular products, large-diameter line pipe is especially hot. If rising steel costs don't force buyers to put pipeline projects on hold, line pipe suppliers could see strong orders through 2010 and beyond.

Escalating steel prices could have a dampening effect on other tubular products as well, including oil country tubular goods and mechanical tubing. Vicki Avril, senior vice president of IPSCO Tubulars Inc., Comanche, Iowa, admits that 2008 began "a little choppy" despite strong demand for both the drilling and transmission of oil and natural gas.

"We are hopeful that 2008 will transform from its rocky start to a decent year" adds John Mocker, vice president of Lally Pipe & Tube, Covington, Ky.

With thousands of miles of new exploration projects in development for both oil and natural gas, mills are seeing an explosion of interest in large-diameter line pipe, says Larry R. Lawrence, vice president of tubular products for Evraz Oregon Steel, Portland, Ore.

Total line pipe consumption (including small diameter and large diameter) reached nearly 5.0 million tons last year, up about 40 percent from 3.5 million tons in 2006, according to Paul Vivian, co-publisher of the Preston Pipe Report, St. Louis. While certain capacity issues may prevent that kind of growth from continuing, double-digit gains are possible again this year, he adds.

Ron Williamson, vice president of sales and logistics for Berg Steel Pipe Co., Panama City, Fla., says that energy companies are investing heavily in new infrastructure in light of record or near-record oil and gas prices. Natural gas, at a price currently near $8 per thousand cubic feet, accounts for 75 to 85 percent of all drilling activity in the United States. Combined with crude oil prices of $85 to $100 per barrel, potential revenues from exploration can justify a lot more projects.

"Demand is coming from all over" he says, pointing to several new transmission lines going from Canada into the United States due to the exploration activity in the Alberta oil sands. "We...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!