New Gas and Oil Projects Development is Beneficial for Pipes and Fittings Industry in Russia

23 Jul 2010 • by Natalie Aster

Global financial crisis and economic slowdown altered the general picture of the Russian pipe industry. The extent of the downturn was particularly pronounced when comparing it with a record-breaking year like 2007, when total pipe production was 9 million tons, according to the country’s non-profit Pipe Industry Development Fund (PIDF).

Nevertheless Russia still remains the world third top tubes manufacturer. Tubes and pipes consumption in Russia decreased by 23% to 5.8 million tons in 2009. Although the decrease in consumption of steel products is tangible in all sectors, today pipe demand in general is projected to experience a full recovery in the coming years. According to Alexander Deineko, the director of the Russian Tube and Pipe Industry Development Fund (FRTP), the Russian steel pipe market is expected to expand by 1.6% to 6.3 million tons in 2010.

Russian pipes and tubes industry has established clear, long-term relations with such partners as Shell, Mannesmann, Danieli, Voest-Alpine. These companies, among other equipment suppliers, are considered to be the sector's main investors.

Russia is active in new gas and oil projects development and launching. An estimated 100,000 kilometres of pipeline, in addition to the existing 250,000 kilometres, will be created in the course of the Sakhalin-2 (delivering natural gas to Japan and China) and other Eastern projects by Gazprom. Other major gas transmission projects are NordStream (to take natural gas into northern Europe), South Stream (across the Black Sea to eastern Europe and then on to Italy and Austria), Blue Stream-2 (Russian gas to Israel via Turkey).

Such developments are beneficial for pipes and tubes industry in Russia, as these projects are joint ventures, so Russia usually has more than a 50 percent stake in any of them, and supplies an equivalent proportion of the pipe needed. NordStream’s requirement for large diameter pipe for its 1,220-kilometer route is put at 2.2 million tons, half of which is likely to be supplied by Russian producers.

Also, participation in international projects brings new demands on quality which were only dreamt of a few years ago – such is Det Norske Veritas (DNV) quality accreditation already gained by some producers across Russia.

More information on the Russian pipes and fittings market may be found in the report Pipes and Fittings Market in Russian Federation: Business Report 2010 recently published by TD The Market Publishers, Ltd.