value reresearch online artilcle on pipes


Way back in 2000, Ramesh Mansukhani, Chairman, Man Group, had stated
that �with refining capacity on the rise, movement of oil and gas is
expected to gain momentum�. Now, in retrospect, one can see that he
was bang on target. More recently, Indresh Batra, MD, Jindal Saw, was
quoted in the press as saying that "the period between 2008 and 2012
will be the golden period for Indian pipe manufacturers." Look at the
dynamics. Oil and gas companies have certainly earned their place in
the sun. But after the discovery comes the transportation and
movement, so to speak. The anticipated growth in that sector is
naturally expected to translate into higher revenues for the line pipe
manufacturing industry.

Depleting oil reserves have led to an increase in exploration efforts
resulting in more wells. Demand for seamless pipes is directly
proportional to the increase in number of wells. With rising crude oil
prices, control on oil transportation cost is gaining more prominence.
The share of pipelines in oil transportation in India is around 33 per
cent as against 75 per cent in developed countries. Transportation
through pipelines offers the advantage of low operating costs (it is
cheaper when compared to road transport), safety, eco-friendliness and
protection against pilferage. Pipeline infrastructure in India is
likely to almost double in the next five years. Not only is India
witnessing domestic heightened activity post the New Exploration and
Licensing Policy (NELP), but USA and the Middle East will be the key
international drivers for Indian pipe players.

Seamless pipes are high-tensile steel pipes used under extreme
conditions such as those at oil fields. They are made by boring a hole
through a steel bar and then rolling it. On the other hand, submerged
arc welded (SAW) pipes are made by fusing together steel plates and
rolling them into the form of pipe.

They are mainly used in oil and natural gas transportation. The demand
for such pipes will be driven by exploration and transportation
activities.

Prominent players in this sector include Jindal SAW, Man Industries,
Maharashtra Seamless, PSL Holdings Ltd and Welspun Gujarat Stahl
Rohren. These companies have full order book positions that cater to
domestic and international demand. Now the news is that GAIL (India)
Ltd. is considering diversifying into gas pipeline construction to
increase the synergy in its core activity (gas transmission and
marketing). Pipeline infrastructure is emerging as a lucrative segment
of the overall infrastructure story.