Oil and natural gas production is bigger in the U.S. than it has been in decades. Thanks to that North American boom, the line-pipe manufacturing industry is experiencing tremendous growth.
The pipe business has undergone many transformations throughout the years when it comes to manufacturing processes and upgrades in technology. But with all the change, a few constants remain, including adherence to the American Petroleum Institute’s (API) 5L product specifications along with many other established industry and governmental regulations.
Law of the land
The API 5L standards were first established in the 1920s to provide manufacturing specifications for seamless pipe used for oil and gas transportation. The standards have undergone 45 upgrades since.
Peter Lidiak, pipeline director for API, tells Midstream Business that when the Natural Gas Pipeline Safety Act was passed in 1968, it established the laws for gas pipeline safety. “Then federal regulations for liquid pipelines were included in the Pipeline Safety Act of 1979 that added liquids and those regulations became effective in the early 1980s,” he said.
Lidiak says the regulations for the pipeline safety act started out with some basic requirements—pertaining to such things as design, construction and operation—but have expanded to encompass a plethora of changes that have affected the industry, most notably, integrity management requirements implemented starting about 10 years ago.
“I think there is always room for improvement whether it be through regulations or some of our industry standards and practices. You know, we aren’t to the point where we have zero pipeline accidents, and that is a goal that I think the entire industry and our regulators are shooting for,” Lidiak says.
Such things as the chemical make-up of steels, tensile strengths and advancements in the manufacturing process are now taken into consideration when revisions are made.
Lidiak adds there are two things that spur revision: problems that arise that need to be addressed by updated specifications and standards and improvements in materials science and manufacturing.
“Congress has authorized safety programs in chunks of about every four, five or six years, and every few years they go back and look at new things that might be a good idea. They receive input from the National Transportation Safety Board from accident investigations they have been at, they receive input from the agency on things they have seen from their inspections, and they get input from the industry,” Lidiak explains. The last revision to the law was in 2011 and parts of that revision are still being implemented. Every firm that supplies line pipe in the U.S. must meet the regulations.
World player
One of the big international names in line pipe is Welspun Group (WCL), which has manufacturing operations in India, the U.S. and in Saudi Arabia.
The company is “one of the largest large-diameter pipe manufacturing companies in the world with a capacity capacity of 2.65 million tons per year around the world,” Braja Mishra, managing director for Welspun Corp. Ltd., tells Midstream Business.
Company growth can be demonstrated through the numbers. “Over the past three years, Welspun has produced, on average, 930,000 tons of pipe and last year [fiscal 2012-13], for the first time, crossed the coveted 1-million-ton production mark,” he says.
Welspun has placed its operations where it has the biggest demand—India, the Middle East and North America, where the company has a stronghold.
“These markets form a lion’s share of the tonnage that we sell around the world. Going forward, Welspun sees huge potential in North America, especially the U.S., which is going toward energy self-sufficiency and potential exports of natural gas and LNG [liquefied natural gas]. Also, there is a huge replacement demand market in the U.S., which would come up very soon as most of the pipelines laid in the U.S. are more than 50 years old. We see large potential in Canada, as Canada looks for new markets for its oil and gas reserves.”
Seeing growth and success for 16 years and counting is something that Mishra takes pride in. Part of what has enabled Welspun to stay in the game is its ability to adapt to changes in the industry.
“Across the industry there is high emphasis on optimizing the manufacturing costs through up-gradation of the technology, efficiency, effectiveness or re-engineering in manufacturing processes in various fields like welding technology, NDE [non-destructive examination] technology, testing, automatic repair, inspection, pipe traceability system through bar coding using RFID [radio frequency identification] system and pipe measurement and marking system technology,” he says.
Adapting to manufacturing changes and being cost-competitive is not enough to keep Welspun in the game forever, though. The company has a strong focus on new product development in a number of midstream areas.
Welspun has developed various cutting-edge pipe products, including sour-service grades and strain-based designs, he adds. “We have also published various technical papers on manufacturing processes and product developments, which showcase our process innovation capabilities and underline our position as a technology leader in this industry.”
Another foreign company, Tenaris, broke ground in September on its first seamless pipe mill in the U.S. near Bay City, Texas, in Matagorda County. The $1.5-billion project is estimated to produce 600,000 tons of seamless steel pipe per year. The facility is expected to be operational by mid-2016.
American giant
After more than 100 years in business, JMC Steel is a household name to some in the industry. It produces more than 2.5 million tons of tubular products per year through 15 manufacturing facilities. One of its latest additions is Energex Tube, a result of the Lakeside Steel acquisition in 2012.
“The purpose of Energex Tube is to consolidate all API pipe production and sales into this singular company specializing in down-hole and line-pipe products from the Wheatland Tube and Lakeside mills,” Geoff O'Donnell, sales manager of Energex Tube, tells Midstream Business.
Energex, which currently manufactures 2-inch to 6-inch diameter line pipe at facilities in Warren, Ohio, and Welland, Ontario, has plans in place to expand its Blytheville, Arkansas, mill that will result in larger and broader line-pipe product offerings.
The Energex brand manufactures approximately 40,000 tons per year of line pipe and has seen a change in customer demand in the past three years.
“We have seen a shift within our size range from 4 inches to 6 inches,” says O’Donnell. He attributes this trend to “pad drilling, which has increased the pipe size of the wellhead takeaways. The trend is for larger diameter— more 8 inch, 10 inch and 12 inch—rather than 3 inch, 4 inch or 6 inch.”
Besides changes in customer demand, the company has also addressed technology upgrades made to compete in a flooded market.
“A recent [capital expenditure] at the Warren ERW mill involved installation of new end facers, packaging equipment and a new hydrostatic tester,” O’Donnell says. “We are currently reviewing a virtual macro for computer generated image of the weld zone to enhance the current metallogaphic and etch testing.”
While the company innovates, O’Donnell notes the market obstacles. “Imports are currently greater than 50% within our size range and new planned pipe manufacturing may create an over-supply of tubular products,” he adds.