Pipelines-Have You Seen The Future?

STEEL PIPES: THE FUTURE HAS JUST BEGUN
What do PSL, Jindal Saw, Maharashtra Seamless, Pratibha Industries, Ratnamani Metals & Welspun Gujarat have in common? All of them service the growing Oil and Gas segment in the country.

During past three years, there has been a change in the mindset of India’s entrepreneurs. A change in thinking is result of the confidence that India is at par with the world. The word multinational no more means a foreign company, infact there are sizable Indian multinationals now, and this number is growing. The change of confidence is visible as even larger amounts are being invested in ventures globally located.

Piping Industry is no exception to this change. There is a huge potential demand for Pipes and Tubes manufactured in India, or manufactured by Indian entrepreneurs in plants located outside India. There would be ample opportunities and the key to unlock those would be the competitiveness and servicing of the customers requirements.

The two major Industry segments in which Steel Pipes are of significant importance are the Oil & Gas and Power segments.

Oil & Gas Industry uses the pipes for a variety of applications in:

On shore and Offshore drilling platforms, for transporting crude oil/gas to refineries and user industries, including cross country pipelines, Refineries themselves have various piping applications, similarly down stream petrochemical projects use pipelines.

The majority of the applications need SAW pipes. These could be LSAW, HSAW, Carbon Steel and Stainless Steel pipes.

According to Simdex (May 2007 update) there are 511 pipeline projects in various stages of completion and planning, totalling upto a combined length of 246,473 kms worldwide. Of these, 90 projects for 81736 kms are being planned in Asia.

India is considered to have low penetration of the pipelines at 15,000 km or 25 % of the required volume. Against this, World average is 75 %. According to an estimate by CRIS INFAC, project for 23,643 km of pipes lines have been planned till 2010.

Such expansion in the pipe lines both by Public as well as private sector companies would generate sizable demand for the entire segment that comprises pipe manufacturing.

GAS: Today, Gas is considered the cleanest form of energy. The transportation of gas through pipelines is a standard mean of transport world over as it is the cheapest mode of transportation.

Currently India country is in the process of laying down trunk lines as a part of the National grid. Also in select cities the gas is now being distributed through pipe lines. This penetration is going to be increasing in the coming days. While larger dia SAW pipes are used for trunk transportation, it is the ERW pipes which are being used for the purpose intra city distribution to the end consumers. There will ultimately be a sizable market both locally as well as globally for this product.

Similarly Ratnamani which manufactures both versions of Steel Pipes at its Anjar, Kutch and Chatral plants especially Carbon Steel products would find adequate market from increased demand due to investment lined up spanning over 10 years in Gas and Oil exploration, Oil and Gas transportation, etc. The Company’s increased capacity would be handily available to take advantage of the increased demand.

The Stainless Steel products would also have global opportunities from Refineries, Power Plants and other Industrial sectors like Paper, Pharmaceuticals etc.

POWER:

The other important sector is power. Ratnamani's products find application in all types of power plants be it Thermal, Hydel or Nuclear. It is expected that during the 11th plan period (2007-12) there is going to be additions of 66,643 MW as under:

A tentative capacity addition of 66,643 MW is planned comprising of 17,189 MW of hydro, 46,114 MW of thermal (44,000 MW coal/lignite, 2,114 MW gas/LNG) and 3,200 MW of nuclear capacity.

This addition coupled with a potential of approx. 58000 MW from renewable energy sector, mainly wind energy would also be opening sizable demand for the ERW products. (Source: Central Electricity Authority/InWEA) .

With Gas pipelines costing close to Rs 3 crore per running kilometre, the overall investment and thus say overall demand for the Steel Pipes segment would be closer to Rs 71,000 crore spread over the period 2007-2011.

Could this segment be then considered a sun rise sector?