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Article Excerpt
WHILE PRICES for both oil and natural gas have seen sharp declines, demand for oil country tubular goods and large-diameter line pipe should remain strong for the foreseeable future, agree most experts.
Recent cries to open up oil and gas drilling on the United States' outer continental shelf and even in the Arctic National Wildlife Refuge--even if they prove louder than environmental opposition--are not expected to have much effect on energy-related pipe demand for at least a decade.
Without question, fluctuating energy prices affect demand for OCTG products, used to drill for oil and natural gas, and large-diameter line pipe, used for the transmission pipelines that convey those resources to market. But other factors are also boosting demand for energy tubulars.
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"Certainly the economics for drilling have improved due to the rise in oil and natural gas prices [earlier this year], but this is only part of the story," says Scott Barnes, vice president and chief commercial officer of TMK IPSCO, Lisle, Ill. TMK IPSCO comprises the U.S. operations of the former IPSCO Tubulars unit of Sweden's SSAB, which Russia's TMK Group acquired earlier this year. "Improvements in technology have lowered the finding and development costs in many of the basins that we deemed uneconomical in the past," he adds. "New drill bit technology, more efficient rigs, assembly line pad drilling and better seismic data are just a few of the improvements that have made unconventional drilling economical."
But Barnes acknowledges that the unusually high and sustained energy prices are the primary drivers behind the increased drilling activity and pipeline construction.
Consultant Christopher Plummet, managing director of Metal Strategies Inc., West Chester, Pa., points out that while oil and gas prices have tumbled from record levels, they remain high by historical standards. Oil dipped from $150 a barrel to around $110 in late August, pushing natural...
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